Did You Miss Motilal Oswal Financial Services’s (NSE:MOTILALOFS) Impressive 153% Share Price Gain?

Motilal Oswal Financial Services Limited (NSE:MOTILALOFS) shareholders might be concerned after seeing the share price drop 12% in the last month. But that doesn’t change the fact that shareholders have received really good returns over the last five years. It’s fair to say most would be happy with 153% the gain in that time. So while it’s never fun to see a share price fall, it’s important to look at a longer time horizon. Ultimately business performance will determine whether the stock price continues the positive long term trend.

Check out our latest analysis for Motilal Oswal Financial Services

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, Motilal Oswal Financial Services achieved compound earnings per share (EPS) growth of 38% per year. This EPS growth is higher than the 20% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.

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

NSEI:MOTILALOFS Past and Future Earnings, February 13th 2020
NSEI:MOTILALOFS Past and Future Earnings, February 13th 2020

We’re pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on Motilal Oswal Financial Services’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, Motilal Oswal Financial Services’s TSR for the last 5 years was 166%, 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

It’s nice to see that Motilal Oswal Financial Services shareholders have received a total shareholder return of 38% over the last year. That’s including the dividend. That gain is better than the annual TSR over five years, which is 22%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It’s always interesting to track share price performance over the longer term. But to understand Motilal Oswal Financial Services better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we’ve spotted 1 warning sign for Motilal Oswal Financial Services you should know about.

If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.