Investors in GAIL (India) (NSE:GAIL) have seen impressive returns of 187% over the past five years

While GAIL (India) Limited (NSE:GAIL) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 21% in the last quarter. But that doesn't change the fact that shareholders have received really good returns over the last five years. It's fair to say most would be happy with 128% the gain in that time. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Ultimately business performance will determine whether the stock price continues the positive long term trend.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

Check out our latest analysis for GAIL (India)

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, GAIL (India) managed to grow its earnings per share at 15% a year. So the EPS growth rate is rather close to the annualized share price gain of 18% per year. This indicates that investor sentiment towards the company has not changed a great deal. Indeed, it would appear the share price is reacting to the EPS.

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. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of GAIL (India)'s earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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 GAIL (India) the TSR over the last 5 years was 187%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

GAIL (India) shareholders have received returns of 17% over twelve months (even including dividends), which isn't far from the general market return. We should note here that the five-year TSR is more impressive, at 23% per year. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes GAIL (India) a stock worth watching. It's always interesting to track share price performance over the longer term. But to understand GAIL (India) better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with GAIL (India) , and understanding them should be part of your investment process.

If you are like me, then you will not want to miss this free list of undervalued small caps 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.