Just Dial's (NSE:JUSTDIAL) five-year earnings growth trails the 6.9% YoY shareholder returns

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. But more than that, you probably want to see it rise more than the market average. But Just Dial Limited (NSE:JUSTDIAL) has fallen short of that second goal, with a share price rise of 40% over five years, which is below the market return. However, more recent buyers should be happy with the increase of 33% over the last year.

The past week has proven to be lucrative for Just Dial investors, so let's see if fundamentals drove the company's five-year performance.

View our latest analysis for Just Dial

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.

Over half a decade, Just Dial managed to grow its earnings per share at 6.6% a year. This EPS growth is remarkably close to the 7% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price has approximately tracked EPS growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Just Dial's earnings, revenue and cash flow.

A Different Perspective

Just Dial shareholders gained a total return of 33% during the year. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 7% per year over five year. This suggests the company might be improving over time. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Indian exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.