Central Depository Services (India)'s (NSE:CDSL) 92% CAGR outpaced the company's earnings growth over the same three-year period

Investing can be hard but the potential fo an individual stock to pay off big time inspires us. Mistakes are inevitable, but a single top stock pick can cover any losses, and so much more. One such superstar is Central Depository Services (India) Limited (NSE:CDSL), which saw its share price soar 578% in three years. Also pleasing for shareholders was the 28% gain in the last three months. It really delights us to see such great share price performance for investors.

Since it's been a strong week for Central Depository Services (India) shareholders, let's have a look at trend of the longer term fundamentals.

See our latest analysis for Central Depository Services (India)

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Central Depository Services (India) was able to grow its EPS at 35% per year over three years, sending the share price higher. In comparison, the 89% per year gain in the share price outpaces the EPS growth. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It's not unusual to see the market 're-rate' a stock, after a few years of growth. This optimism is also reflected in the fairly generous P/E ratio of 63.17.

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

We know that Central Depository Services (India) has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Central Depository Services (India)'s balance sheet strength 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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Central Depository Services (India), it has a TSR of 604% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Central Depository Services (India) rewarded shareholders with a total shareholder return of 195% over the last year. That's including the dividend. That gain actually surpasses the 92% TSR it generated (per year) over three years. The improving returns to shareholders suggests the stock is becoming more popular with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Central Depository Services (India) (at least 1 which can't be ignored) , and understanding them should be part of your investment process.

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 IN 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.