Godrej Consumer Products (NSE:GODREJCP) shareholders have earned a 11% CAGR over the last five years

If you buy and hold a stock for many years, you'd hope to be making a profit. Furthermore, you'd generally like to see the share price rise faster than the market. But Godrej Consumer Products Limited (NSE:GODREJCP) has fallen short of that second goal, with a share price rise of 65% over five years, which is below the market return. Unfortunately the share price is down 9.8% in the last year.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

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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. 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 the five years of share price growth, Godrej Consumer Products moved from a loss to profitability. That would generally be considered a positive, so we'd hope to see the share price to rise.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Godrej Consumer Products has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Godrej Consumer Products will grow revenue in the future.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Godrej Consumer Products, it has a TSR of 71% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Investors in Godrej Consumer Products had a tough year, with a total loss of 8.3% (including dividends), against a market gain of about 3.0%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 11% 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. 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. Even so, be aware that Godrej Consumer Products is showing 1 warning sign in our investment analysis , you should know about...

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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.