The total return for Sundaram Finance (NSE:SUNDARMFIN) investors has risen faster than earnings growth over the last five years

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, you can make far more than 100% on a really good stock. One great example is Sundaram Finance Limited (NSE:SUNDARMFIN) which saw its share price drive 160% higher over five years. It's down 6.1% in the last seven days.

Since the long term performance has been good but there's been a recent pullback of 6.1%, let's check if the fundamentals match the share price.

See our latest analysis for Sundaram Finance

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. 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.

During five years of share price growth, Sundaram Finance achieved compound earnings per share (EPS) growth of 4.3% per year. This EPS growth is slower than the share price growth of 21% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

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

This free interactive report on Sundaram Finance'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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Sundaram Finance's TSR for the last 5 years was 173%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Sundaram Finance has rewarded shareholders with a total shareholder return of 78% in the last twelve months. 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. In the best case scenario, this 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 Sundaram Finance better, we need to consider many other factors. To that end, you should learn about the 4 warning signs we've spotted with Sundaram Finance (including 2 which can't be ignored) .

But note: Sundaram 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.