Cigniti Technologies' (NSE:CIGNITITEC) 28% CAGR outpaced the company's earnings growth over the same five-year period

When you buy a stock there is always a possibility that it could drop 100%. But on a lighter note, a good company can see its share price rise well over 100%. For example, the Cigniti Technologies Limited (NSE:CIGNITITEC) share price has soared 242% in the last half decade. Most would be very happy with that. And in the last week the share price has popped 11%.

Since the stock has added ₹2.9b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Cigniti Technologies

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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over half a decade, Cigniti Technologies managed to grow its earnings per share at 6.5% a year. This EPS growth is lower than the 28% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

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

This free interactive report on Cigniti Technologies' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Cigniti Technologies, it has a TSR of 249% 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 good to see that Cigniti Technologies has rewarded shareholders with a total shareholder return of 56% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 28%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Cigniti Technologies better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with Cigniti Technologies .

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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.