eClerx Services (NSE:ECLERX) sheds 8.4% this week, as yearly returns fall more in line with earnings growth

For many, the main point of investing in the stock market is to achieve spectacular returns. While not every stock performs well, when investors win, they can win big. For example, the eClerx Services Limited (NSE:ECLERX) share price is up a whopping 809% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. But it's down 8.4% in the last week. But note that the broader market is down 1.2% since last week, and this may have impacted eClerx Services' share price. We love happy stories like this one. The company should be really proud of that performance!

Although eClerx Services has shed ₹19b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

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To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, eClerx Services achieved compound earnings per share (EPS) growth of 24% per year. This EPS growth is slower than the share price growth of 55% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that eClerx Services has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

A Different Perspective

We're pleased to report that eClerx Services shareholders have received a total shareholder return of 31% over one year. That's including the dividend. However, the TSR over five years, coming in at 56% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. Before deciding if you like the current share price, check how eClerx Services scores on these 3 valuation metrics.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.