Is Central Depository Services (India)'s (NSE:CDSL) Share Price Gain Of 147% 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%. Take, for example Central Depository Services (India) Limited (NSE:CDSL). Its share price is already up an impressive 147% in the last twelve months. In more good news, the share price has risen -4.6% in thirty days. It is also impressive that the stock is up 96% over three years, adding to the sense that it is a real winner.

See 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. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Central Depository Services (India) was able to grow EPS by 60% in the last twelve months. The share price gain of 147% certainly outpaced the EPS growth. This indicates that the market is now more optimistic about the stock.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Central Depository Services (India) has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Central Depository Services (India) the TSR over the last year was 149%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Central Depository Services (India) shareholders have gained 149% (in total) over the last year. That includes the value of the dividend. That's better than the annualized TSR of 27% over the last three years. Given the track record of solid returns over varying time frames, it might be worth putting Central Depository Services (India) on your watchlist. 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. Case in point: We've spotted 1 warning sign for Central Depository Services (India) 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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