Tourism Finance Corporation of India (NSE:TFCILTD) shareholders notch a 39% CAGR over 5 years, yet earnings have been shrinking

Buying shares in the best businesses can build meaningful wealth for you and your family. And we've seen some truly amazing gains over the years. Just think about the savvy investors who held Tourism Finance Corporation of India Limited (NSE:TFCILTD) shares for the last five years, while they gained 387%. And this is just one example of the epic gains achieved by some long term investors. Better yet, the share price has risen 18% in the last week.

Since it's been a strong week for Tourism Finance Corporation of India shareholders, let's have a look at trend of the longer term fundamentals.

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 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).

Tourism Finance Corporation of India's earnings per share are down 2.8% per year, despite strong share price performance over five years.

So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Therefore, it's worth taking a look at other metrics to try to understand the share price movements.

We doubt the modest 1.5% dividend yield is attracting many buyers to the stock. On the other hand, Tourism Finance Corporation of India's revenue is growing nicely, at a compound rate of 4.6% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Dive deeper into the earnings by checking this interactive graph of Tourism Finance Corporation of India's earnings, revenue and cash flow.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Tourism Finance Corporation of India's TSR for the last 5 years was 422%, 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

Investors in Tourism Finance Corporation of India had a tough year, with a total loss of 1.0% (including dividends), against a market gain of about 6.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 39% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Tourism Finance Corporation of India better, we need to consider many other factors. Take risks, for example - Tourism Finance Corporation of India has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

Tourism Finance Corporation of India is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.

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.