Coromandel International's (NSE:COROMANDEL) earnings growth rate lags the 33% CAGR delivered to shareholders

When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Coromandel International Limited (NSE:COROMANDEL) share price has soared 295% in the last half decade. Most would be very happy with that. Unfortunately, though, the stock has dropped 6.8% over a week. However, this might be related to the overall market decline of 3.2% in a week.

In light of the stock dropping 6.8% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

Check out our latest analysis for Coromandel International

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Coromandel International achieved compound earnings per share (EPS) growth of 16% per year. This EPS growth is lower than the 32% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.

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

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

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Coromandel International's TSR for the last 5 years was 317%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Coromandel International provided a TSR of 41% over the year (including dividends). That's fairly close to the broader market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 33% per year. It is possible that management foresight will bring growth well into the future, even if the share price slows down. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Coromandel International is showing 1 warning sign in our investment analysis , you should know about...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.