Bharat Petroleum's (NSE:BPCL) 20% CAGR outpaced the company's earnings growth over the same five-year period

If you buy and hold a stock for many years, you'd hope to be making a profit. But more than that, you probably want to see it rise more than the market average. Unfortunately for shareholders, while the Bharat Petroleum Corporation Limited (NSE:BPCL) share price is up 80% in the last five years, that's less than the market return. The last year hasn't been great either, with the stock up just 2.1%.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

We've discovered 3 warning signs about Bharat Petroleum. View them for free.

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.

Over half a decade, Bharat Petroleum managed to grow its earnings per share at 32% a year. The EPS growth is more impressive than the yearly share price gain of 13% over the same period. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 10.09.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Bharat Petroleum's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Bharat Petroleum, it has a TSR of 150% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Bharat Petroleum has rewarded shareholders with a total shareholder return of 7.5% in the last twelve months. And that does include the dividend. However, the TSR over five years, coming in at 20% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. It's always interesting to track share price performance over the longer term. But to understand Bharat Petroleum better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Bharat Petroleum , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.