eClerx Services (NSE:ECLERX) stock performs better than its underlying earnings growth over last five years

Long term investing can be life changing when you buy and hold the truly great businesses. And highest quality companies can see their share prices grow by huge amounts. For example, the eClerx Services Limited (NSE:ECLERX) share price is up a whopping 929% 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. On top of that, the share price is up 38% in about a quarter. Anyone who held for that rewarding ride would probably be keen to talk about it.

Since it's been a strong week for eClerx Services shareholders, let's have a look at trend of the longer term fundamentals.

See our latest analysis for eClerx Services

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 28% a year. This EPS growth is slower than the share price growth of 59% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

This free interactive report on eClerx Services' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, eClerx Services' TSR for the last 5 years was 932%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that eClerx Services shareholders have received a total shareholder return of 50% over the last year. That's including the dividend. Having said that, the five-year TSR of 60% a year, is even better. Before forming an opinion on eClerx Services you might want to consider these 3 valuation metrics.

We will like eClerx Services better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.