Honeywell Automation India's (NSE:HONAUT) earnings growth rate lags the 8.4% CAGR delivered to shareholders

It hasn't been the best quarter for Honeywell Automation India Limited (NSE:HONAUT) shareholders, since the share price has fallen 18% in that time. On the bright side the share price is up over the last half decade. In that time, it is up 48%, which isn't bad, but is below the market return of 149%.

In light of the stock dropping 4.0% 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.

View our latest analysis for Honeywell Automation India

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, Honeywell Automation India achieved compound earnings per share (EPS) growth of 5.5% per year. This EPS growth is slower than the share price growth of 8% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth. This optimism is visible in its fairly high P/E ratio of 69.22.

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

We know that Honeywell Automation India has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

A Different Perspective

Honeywell Automation India's TSR for the year was broadly in line with the market average, at 13%. That gain looks pretty satisfying, and it is even better than the five-year TSR of 8% per year. It is possible that management foresight will bring growth well into the future, even if the share price slows down. It's always interesting to track share price performance over the longer term. But to understand Honeywell Automation India better, we need to consider many other factors. Take risks, for example - Honeywell Automation India has 1 warning sign we think you should be aware of.

Of course Honeywell Automation India 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.