Reliance Industrial Infrastructure's (NSE:RIIL) earnings growth rate lags the 30% CAGR delivered to shareholders

Reliance Industrial Infrastructure Limited (NSE:RIIL) shareholders might be concerned after seeing the share price drop 14% in the last week. But that doesn't change the fact that the returns over the last five years have been very strong. In fact, the share price is 258% higher today. To some, the recent pullback wouldn't be surprising after such a fast rise. Of course, that doesn't necessarily mean it's cheap now.

Although Reliance Industrial Infrastructure has shed ₹2.9b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

Check out our latest analysis for Reliance Industrial Infrastructure

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, Reliance Industrial Infrastructure managed to grow its earnings per share at 18% a year. This EPS growth is slower than the share price growth of 29% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 84.10.

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

This free interactive report on Reliance Industrial Infrastructure's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Reliance Industrial Infrastructure the TSR over the last 5 years was 269%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Reliance Industrial Infrastructure shareholders have received returns of 50% over twelve months (even including dividends), which isn't far from the general market return. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 30%. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 1 warning sign for Reliance Industrial Infrastructure that you should be aware of.

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.