Everest Kanto Cylinder's (NSE:EKC) earnings growth rate lags the 38% CAGR delivered to shareholders

It might be of some concern to shareholders to see the Everest Kanto Cylinder Limited (NSE:EKC) share price down 20% in the last month. But that doesn't change the fact that the returns over the last half decade have been spectacular. Indeed, the share price is up a whopping 388% in that time. Arguably, the recent fall is to be expected after such a strong rise. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price.

Although Everest Kanto Cylinder has shed ₹2.0b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

See our latest analysis for Everest Kanto Cylinder

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, Everest Kanto Cylinder achieved compound earnings per share (EPS) growth of 20% per year. This EPS growth is slower than the share price growth of 37% per year, over the same period. 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 how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Everest Kanto Cylinder 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.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Everest Kanto Cylinder, it has a TSR of 394% 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

It's good to see that Everest Kanto Cylinder has rewarded shareholders with a total shareholder return of 75% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 38% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Everest Kanto Cylinder better, we need to consider many other factors. For instance, we've identified 1 warning sign for Everest Kanto Cylinder that you should be aware of.

If you are like me, then you will not want to miss this free list of growing companies that insiders are 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.