Oberoi Realty (NSE:OBEROIRLTY) sheds 6.7% this week, as yearly returns fall more in line with earnings growth

Oberoi Realty Limited (NSE:OBEROIRLTY) shareholders might be concerned after seeing the share price drop 20% in the last month. But in stark contrast, the returns over the last half decade have impressed. Indeed, the share price is up an impressive 206% in that time. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Ultimately business performance will determine whether the stock price continues the positive long term trend.

Since the long term performance has been good but there's been a recent pullback of 6.7%, let's check if the fundamentals match the share price.

Check out our latest analysis for Oberoi Realty

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, Oberoi Realty achieved compound earnings per share (EPS) growth of 34% per year. This EPS growth is higher than the 25% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It is of course excellent to see how Oberoi Realty has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Oberoi Realty's financial health with this free report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Oberoi Realty, it has a TSR of 211% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Oberoi Realty shareholders have received a total shareholder return of 22% over the last year. Of course, that includes the dividend. However, the TSR over five years, coming in at 25% per year, is even more impressive. 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 instance, we've identified 1 warning sign for Oberoi Realty that you should be aware of.

Of course Oberoi Realty may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.