There's no doubt that investing in the stock market is a truly brilliant way to build wealth. But not every stock you buy will perform as well as the overall market. For example, the HDFC Life Insurance Company Limited (NSE:HDFCLIFE), share price is up over the last year, but its gain of 47% trails the market return. Looking back further, the stock price is 41% higher than it was three years ago.
There is no denying that markets are sometimes efficient, but prices do not always reflect 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 the last year HDFC Life Insurance grew its earnings per share (EPS) by 2.4%. The share price gain of 47% certainly outpaced the EPS growth. This indicates that the market is now more optimistic about the stock. The fairly generous P/E ratio of 104.07 also points to this optimism.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on HDFC Life Insurance's earnings, revenue and cash flow.
A Different Perspective
Over the last year HDFC Life Insurance shareholders have received a TSR of 47%. Unfortunately this falls short of the market return of around 80%. On the other hand, the TSR over three years was worse, at just 12% per year. This suggests the company's position is improving. If the share price is up as a result of improved business performance, then this kind of improvement may be sustained. 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 HDFC Life Insurance is showing 1 warning sign in our investment analysis , you should know about...
We will like HDFC Life Insurance better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN exchanges.
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This article by Simply Wall St is general in nature. 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.
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