Gufic Biosciences' (NSE:GUFICBIO) five-year total shareholder returns outpace the underlying earnings growth

The Gufic Biosciences Limited (NSE:GUFICBIO) share price has had a bad week, falling 10%. But in stark contrast, the returns over the last half decade have impressed. We think most investors would be happy with the 289% return, over that period. 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.

In light of the stock dropping 10% 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 five-year return.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Over half a decade, Gufic Biosciences managed to grow its earnings per share at 19% a year. This EPS growth is lower than the 31% 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 optimism is visible in its fairly high P/E ratio of 52.41.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Gufic Biosciences' earnings, revenue and cash flow.

A Different Perspective

It's nice to see that Gufic Biosciences shareholders have received a total shareholder return of 2.6% over the last year. And that does include the dividend. However, that falls short of the 31% TSR per annum it has made for shareholders, each year, over five years. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 1 warning sign for Gufic Biosciences 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.