The Bajaj Finance (NSE:BAJFINANCE) Share Price Has Soared 736%, Delighting Many Shareholders

We think all investors should try to buy and hold high quality multi-year winners. And we've seen some truly amazing gains over the years. To wit, the Bajaj Finance Limited (NSE:BAJFINANCE) share price has soared 736% over five years. 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 12% in about a quarter. But this could be related to the strong market, which is up 14% in the last three months.

Anyone who held for that rewarding ride would probably be keen to talk about it.

See our latest analysis for Bajaj Finance

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over half a decade, Bajaj Finance managed to grow its earnings per share at 23% a year. This EPS growth is lower than the 53% average annual increase in the share price. 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. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 79.47.

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

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on Bajaj Finance's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. We note that for Bajaj Finance the TSR over the last 5 years was 746%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Bajaj Finance provided a TSR of 34% over the last twelve months. But that was short of the market average. On the bright side, the longer term returns (running at about 53% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Bajaj Finance is showing 3 warning signs in our investment analysis , and 1 of those is significant...

Bajaj Finance is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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

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This article by Simply Wall St is general in nature. 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.
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