Bajaj Finserv (NSE:BAJAJFINSV) sheds 3.0% this week, as yearly returns fall more in line with earnings growth

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. Long term Bajaj Finserv Ltd. (NSE:BAJAJFINSV) shareholders would be well aware of this, since the stock is up 127% in five years. Also pleasing for shareholders was the 12% gain in the last three months.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

See our latest analysis for Bajaj Finserv

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 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, Bajaj Finserv achieved compound earnings per share (EPS) growth of 21% per year. So the EPS growth rate is rather close to the annualized share price gain of 18% per year. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Bajaj Finserv 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

Bajaj Finserv shareholders gained a total return of 11% during the year. But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 18% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand Bajaj Finserv better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Bajaj Finserv you should be aware of, and 1 of them can't be ignored.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.