Cosmo First's (NSE:COSMOFIRST) five-year earnings growth trails the 50% YoY shareholder returns

Long term investing can be life changing when you buy and hold the truly great businesses. And highest quality companies can see their share prices grow by huge amounts. For example, the Cosmo First Limited (NSE:COSMOFIRST) share price is up a whopping 563% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. In more good news, the share price has risen 35% in thirty days. It really delights us to see such great share price performance for investors.

Since the stock has added ₹4.2b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Cosmo First

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. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Cosmo First achieved compound earnings per share (EPS) growth of 3.1% per year. This EPS growth is lower than the 46% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. 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 Cosmo First'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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Cosmo First's TSR for the last 5 years was 654%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Cosmo First shareholders have received a total shareholder return of 68% over the last year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 50%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Take risks, for example - Cosmo First has 5 warning signs (and 2 which are potentially serious) we think you should know about.

We will like Cosmo First better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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 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.