eClerx Services (NSE:ECLERX) sheds 5.3% this week, as yearly returns fall more in line with earnings growth

It hasn't been the best quarter for eClerx Services Limited (NSE:ECLERX) shareholders, since the share price has fallen 11% in that time. But that doesn't change the fact that shareholders have received really good returns over the last five years. It's fair to say most would be happy with 209% the gain in that time. Generally speaking the long term returns will give you a better idea of business quality than short periods can. The more important question is whether the stock is too cheap or too expensive today.

Since the long term performance has been good but there's been a recent pullback of 5.3%, let's check if the fundamentals match the share price.

Check out our latest analysis for eClerx Services

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Over half a decade, eClerx Services managed to grow its earnings per share at 21% a year. So the EPS growth rate is rather close to the annualized share price gain of 25% per year. That suggests that the market sentiment around the company hasn't changed much over that time. Indeed, it would appear the share price is reacting to the EPS.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It is of course excellent to see how eClerx Services has grown profits over the years, but the future is more important for shareholders. This free interactive report on eClerx Services' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's nice to see that eClerx Services shareholders have received a total shareholder return of 75% over the last year. And that does include the dividend. That's better than the annualised return of 25% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before forming an opinion on eClerx Services you might want to consider these 3 valuation metrics.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Indian exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.