Cholamandalam Investment and Finance (NSE:CHOLAFIN) jumps 3.6% this week, though earnings growth is still tracking behind five-year shareholder returns

We think all investors should try to buy and hold high quality multi-year winners. While the best companies are hard to find, but they can generate massive returns over long periods. To wit, the Cholamandalam Investment and Finance Company Limited (NSE:CHOLAFIN) share price has soared 554% over five years. If that doesn't get you thinking about long term investing, we don't know what will. And in the last month, the share price has gained 8.0%. We love happy stories like this one. The company should be really proud of that performance!

Since it's been a strong week for Cholamandalam Investment and Finance shareholders, let's have a look at trend of the longer term fundamentals.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).

Over half a decade, Cholamandalam Investment and Finance managed to grow its earnings per share at 29% a year. This EPS growth is lower than the 46% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

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

We know that Cholamandalam Investment and Finance 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?

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. As it happens, Cholamandalam Investment and Finance's TSR for the last 5 years was 562%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Cholamandalam Investment and Finance shareholders have received a total shareholder return of 0.9% over one year. That's including the dividend. However, that falls short of the 46% TSR per annum it has made for shareholders, each year, over five years. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. It's always interesting to track share price performance over the longer term. But to understand Cholamandalam Investment and Finance better, we need to consider many other factors. Take risks, for example - Cholamandalam Investment and Finance has 1 warning sign we think you should be aware of.

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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.