Aditya Birla Capital (NSE:ABCAPITAL) shareholders have earned a 33% CAGR over the last five years

Buying shares in the best businesses can build meaningful wealth for you and your family. And we've seen some truly amazing gains over the years. For example, the Aditya Birla Capital Limited (NSE:ABCAPITAL) share price is up a whopping 310% in the last half decade, a handsome return for long term holders. And this is just one example of the epic gains achieved by some long term investors. It's also up 18% in about a month. But this could be related to good market conditions -- stocks in its market are up 7.6% in the last month.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

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In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

During five years of share price growth, Aditya Birla Capital achieved compound earnings per share (EPS) growth of 25% per year. This EPS growth is slower than the share price growth of 33% 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. That's not necessarily surprising considering the five-year track record of earnings growth.

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

We know that Aditya Birla Capital has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

A Different Perspective

While the broader market gained around 4.3% in the last year, Aditya Birla Capital shareholders lost 7.9%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 33% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Aditya Birla Capital better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Aditya Birla Capital you should know about.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.