Bajaj Finserv (NSE:BAJAJFINSV) sheds 3.3% this week, as yearly returns fall more in line with earnings growth

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, you can make far more than 100% on a really good stock. Long term Bajaj Finserv Ltd. (NSE:BAJAJFINSV) shareholders would be well aware of this, since the stock is up 232% in five years. On the other hand, the stock price has retraced 3.3% in the last week.

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.

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While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, Bajaj Finserv achieved compound earnings per share (EPS) growth of 20% per year. This EPS growth is slower than the share price growth of 27% 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.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

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A Different Perspective

We're pleased to report that Bajaj Finserv shareholders have received a total shareholder return of 19% over one year. And that does include the dividend. However, that falls short of the 27% TSR per annum it has made for shareholders, each year, over five years. 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. For instance, we've identified 1 warning sign for Bajaj Finserv that you should be aware of.

But note: Bajaj Finserv may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.