PNB Housing Finance's (NSE:PNBHOUSING) one-year earnings growth trails the favorable shareholder returns

We believe investing is smart because history shows that stock markets go higher in the long term. But if when you choose to buy stocks, some of them will be below average performers. Unfortunately for shareholders, while the PNB Housing Finance Limited (NSE:PNBHOUSING) share price is up 36% in the last year, that falls short of the market return. It is also impressive that the stock is up 33% over three years, adding to the sense that it is a real winner.

Since the stock has added ₹11b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for PNB Housing Finance

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

PNB Housing Finance was able to grow EPS by 0.8% in the last twelve months. The share price gain of 36% certainly outpaced the EPS growth. So it's fair to assume the market has a higher opinion of the business than it a year ago.

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

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. Dive deeper into the earnings by checking this interactive graph of PNB Housing Finance's earnings, revenue and cash flow.

A Different Perspective

PNB Housing Finance shareholders are up 36% for the year. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 10% per year over five year. It is possible that returns will improve along with the business fundamentals. 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. For example, we've discovered 1 warning sign for PNB Housing Finance that you should be aware of before investing here.

But note: PNB Housing Finance 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 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.