Central Depository Services (India)'s (NSE:CDSL) earnings growth rate lags the 57% CAGR delivered to shareholders

It hasn't been the best quarter for Central Depository Services (India) Limited (NSE:CDSL) shareholders, since the share price has fallen 30% in that time. But over five years returns have been remarkably great. In fact, during that period, the share price climbed 800%. Impressive! Arguably, the recent fall is to be expected after such a strong rise. The most important thing for savvy investors to consider is whether the underlying business can justify the share price gain. Anyone who held for that rewarding ride would probably be keen to talk about it.

In light of the stock dropping 7.6% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

Check out our latest analysis for Central Depository Services (India)

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.

During five years of share price growth, Central Depository Services (India) achieved compound earnings per share (EPS) growth of 38% per year. This EPS growth is slower than the share price growth of 55% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Central Depository Services (India) has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Central Depository Services (India) will grow revenue in the future.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Central Depository Services (India) the TSR over the last 5 years was 847%, 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

We're pleased to report that Central Depository Services (India) shareholders have received a total shareholder return of 21% over one year. And that does include the dividend. However, that falls short of the 57% TSR per annum it has made for shareholders, each year, over five years. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. Is Central Depository Services (India) cheap compared to other companies? These 3 valuation measures might help you decide.

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.