Is Central Depository Services (India)'s (NSE:CDSL) Share Price Gain Of 142% Well Earned?

When you buy shares in a company, there is always a risk that the price drops to zero. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Central Depository Services (India) Limited (NSE:CDSL) share price has soared 142% in the last year. Most would be very happy with that, especially in just one year! It's also good to see the share price up 18% over the last quarter. But this could be related to the strong market, which is up 18% in the last three months. Also impressive, the stock is up 56% over three years, making long term shareholders happy, too.

View 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 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.

Central Depository Services (India) was able to grow EPS by 22% in the last twelve months. This EPS growth is significantly lower than the 142% increase in the share price. So it's fair to assume the market has a higher opinion of the business than it a year ago.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

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?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, Central Depository Services (India)'s TSR for the last year was 144%, which exceeds the share price return mentioned earlier. 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) rewarded shareholders with a total shareholder return of 144% over the last year. That includes the value of the dividend. That's better than the annualized TSR of 18% over the last three years. These improved returns may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Central Depository Services (India) better, we need to consider many other factors. For instance, we've identified 2 warning signs for Central Depository Services (India) (1 is a bit concerning) that you should be aware of.

But note: Central Depository Services (India) 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 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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