Vidhi Specialty Food Ingredients' (NSE:VIDHIING) earnings growth rate lags the 47% CAGR delivered to shareholders

It's been a soft week for Vidhi Specialty Food Ingredients Limited (NSE:VIDHIING) shares, which are down 14%. But over five years returns have been remarkably great. Indeed, the share price is up a whopping 558% in that time. Arguably, the recent fall is to be expected after such a strong rise. Only time will tell if there is still too much optimism currently reflected in the share price. It really delights us to see such great share price performance for investors.

While the stock has fallen 14% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

Check out our latest analysis for Vidhi Specialty Food Ingredients

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. 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.

Over half a decade, Vidhi Specialty Food Ingredients managed to grow its earnings per share at 4.6% a year. This EPS growth is lower than the 46% 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. And that's hardly shocking given the track record of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 62.27.

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

Dive deeper into Vidhi Specialty Food Ingredients' key metrics by checking this interactive graph of Vidhi Specialty Food Ingredients's 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. 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, Vidhi Specialty Food Ingredients' TSR for the last 5 years was 576%, 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

Vidhi Specialty Food Ingredients provided a TSR of 9.7% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 47% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand Vidhi Specialty Food Ingredients better, we need to consider many other factors. For example, we've discovered 1 warning sign for Vidhi Specialty Food Ingredients that you should be aware of before investing here.

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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.