Gujarat Narmada Valley Fertilizers & Chemicals' (NSE:GNFC) five-year earnings growth trails the stellar shareholder returns

It hasn't been the best quarter for Gujarat Narmada Valley Fertilizers & Chemicals Limited (NSE:GNFC) shareholders, since the share price has fallen 12% in that time. But that doesn't change the fact that the returns over the last five years have been very strong. We think most investors would be happy with the 168% return, over that period. To some, the recent pullback wouldn't be surprising after such a fast rise. The more important question is whether the stock is too cheap or too expensive today. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 24% decline over the last twelve months.

The past week has proven to be lucrative for Gujarat Narmada Valley Fertilizers & Chemicals investors, so let's see if fundamentals drove the company's five-year performance.

Check out our latest analysis for Gujarat Narmada Valley Fertilizers & Chemicals

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 five years of share price growth, Gujarat Narmada Valley Fertilizers & Chemicals achieved compound earnings per share (EPS) growth of 2.6% per year. This EPS growth is slower than the share price growth of 22% per year, over the same period. 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 how EPS has changed over time in the image below (click on the chart to see the exact values).

It might be well worthwhile taking a look at our free report on Gujarat Narmada Valley Fertilizers & Chemicals' earnings, revenue and cash flow.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Gujarat Narmada Valley Fertilizers & Chemicals' TSR for the last 5 years was 207%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Gujarat Narmada Valley Fertilizers & Chemicals shareholders are down 23% for the year (even including dividends), but the market itself is up 13%. 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 25% 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. It's always interesting to track share price performance over the longer term. But to understand Gujarat Narmada Valley Fertilizers & Chemicals better, we need to consider many other factors. Even so, be aware that Gujarat Narmada Valley Fertilizers & Chemicals is showing 2 warning signs in our investment analysis , you should know about...

We will like Gujarat Narmada Valley Fertilizers & Chemicals 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.