Aurobindo Pharma's (NSE:AUROPHARMA) five-year earnings growth trails the 24% YoY shareholder returns

Aurobindo Pharma Limited (NSE:AUROPHARMA) shareholders might be concerned after seeing the share price drop 20% in the last quarter. But that doesn't change the fact that the returns over the last five years have been very strong. Indeed, the share price is up an impressive 183% in that time. To some, the recent pullback wouldn't be surprising after such a fast rise. Only time will tell if there is still too much optimism currently reflected in the share price.

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

View our latest analysis for Aurobindo Pharma

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Aurobindo Pharma achieved compound earnings per share (EPS) growth of 7.0% per year. This EPS growth is slower than the share price growth of 23% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

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

We know that Aurobindo Pharma has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

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. We note that for Aurobindo Pharma the TSR over the last 5 years was 193%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Aurobindo Pharma shareholders are up 22% for the year (even including dividends). But that was short of the market average. On the bright side, the longer term returns (running at about 24% 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. If you would like to research Aurobindo Pharma in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.