Albert David's (NSE:ALBERTDAVD) five-year total shareholder returns outpace the underlying earnings growth

It might be of some concern to shareholders to see the Albert David Limited (NSE:ALBERTDAVD) share price down 18% in the last month. But that doesn't change the fact that shareholders have received really good returns over the last five years. In fact, the share price is 171% higher today. We think it's more important to dwell on the long term returns than the short term returns. The more important question is whether the stock is too cheap or too expensive today.

Although Albert David has shed ₹936m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

View our latest analysis for Albert David

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. 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 five years of share price growth, Albert David achieved compound earnings per share (EPS) growth of 20% per year. So the EPS growth rate is rather close to the annualized share price gain of 22% per year. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Indeed, it would appear the share price is reacting to the EPS.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into Albert David's key metrics by checking this interactive graph of Albert David'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. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Albert David the TSR over the last 5 years was 190%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Albert David provided a TSR of 12% over the last twelve months. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 24% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 3 warning signs for Albert David (1 is concerning!) that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.