GOCL's (NSE:GOCLCORP) three-year total shareholder returns outpace the underlying earnings growth

It might be of some concern to shareholders to see the GOCL Corporation Limited (NSE:GOCLCORP) share price down 12% in the last month. But in three years the returns have been great. Indeed, the share price is up a very strong 115% in that time. After a run like that some may not be surprised to see prices moderate. The thing to consider is whether the underlying business is doing well enough to support the current price.

In light of the stock dropping 11% 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 three-year return.

View our latest analysis for GOCL

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 three years of share price growth, GOCL achieved compound earnings per share growth of 90% per year. The average annual share price increase of 29% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat. This cautious sentiment is reflected in its (fairly low) P/E ratio of 4.44.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Dive deeper into GOCL's key metrics by checking this interactive graph of GOCL's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, GOCL's TSR for the last 3 years was 127%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that GOCL shareholders have received a total shareholder return of 8.6% over one year. That's including the dividend. Notably the five-year annualised TSR loss of 6% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand GOCL better, we need to consider many other factors. For instance, we've identified 4 warning signs for GOCL (1 shouldn't be ignored) that you should be aware of.

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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.