Expleo Solutions' (NSE:EXPLEOSOL) 44% CAGR outpaced the company's earnings growth over the same five-year period

It hasn't been the best quarter for Expleo Solutions Limited (NSE:EXPLEOSOL) shareholders, since the share price has fallen 11% in that time. But that doesn't undermine the fantastic longer term performance (measured over five years). In fact, during that period, the share price climbed 495%. Impressive! So it might be that some shareholders are taking profits after good performance. Only time will tell if there is still too much optimism currently reflected in the share price. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 32% decline over the last twelve months.

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

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While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, Expleo Solutions achieved compound earnings per share (EPS) growth of 13% per year. This EPS growth is lower than the 43% average annual increase in the share price. 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 graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for Expleo Solutions the TSR over the last 5 years was 523%, 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

Investors in Expleo Solutions had a tough year, with a total loss of 29% (including dividends), against a market gain of about 5.6%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 44%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Expleo Solutions better, we need to consider many other factors. For example, we've discovered 1 warning sign for Expleo Solutions 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.