Hindustan Foods' (NSE:HNDFDS) earnings growth rate lags the 30% CAGR delivered to shareholders

It hasn't been the best quarter for Hindustan Foods Limited (NSE:HNDFDS) shareholders, since the share price has fallen 23% in that time. But that scarcely detracts from the really solid long term returns generated by the company over five years. Indeed, the share price is up an impressive 278% in that time. We think it's more important to dwell on the long term returns than the short term returns. Of course, that doesn't necessarily mean it's cheap now.

Since the long term performance has been good but there's been a recent pullback of 6.8%, let's check if the fundamentals match the share price.

See our latest analysis for Hindustan Foods

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

During five years of share price growth, Hindustan Foods achieved compound earnings per share (EPS) growth of 35% per year. So the EPS growth rate is rather close to the annualized share price gain of 30% per year. This indicates that investor sentiment towards the company has not changed a great deal. Indeed, it would appear the share price is reacting to the EPS.

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

We know that Hindustan Foods has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

A Different Perspective

While the broader market gained around 19% in the last year, Hindustan Foods shareholders lost 5.7%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 30%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Hindustan Foods better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Hindustan Foods , and understanding them should be part of your investment process.

But note: Hindustan Foods 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.