Investing in Cognizant Technology Solutions (NASDAQ:CTSH) five years ago would have delivered you a 41% gain

If you buy and hold a stock for many years, you'd hope to be making a profit. Furthermore, you'd generally like to see the share price rise faster than the market. Unfortunately for shareholders, while the Cognizant Technology Solutions Corporation (NASDAQ:CTSH) share price is up 30% in the last five years, that's less than the market return. Zooming in, the stock is up a respectable 11% in the last year.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

See our latest analysis for Cognizant Technology Solutions

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, Cognizant Technology Solutions managed to grow its earnings per share at 4.2% a year. This EPS growth is lower than the 5% 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.

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

Dive deeper into Cognizant Technology Solutions' key metrics by checking this interactive graph of Cognizant Technology Solutions's earnings, revenue and cash flow.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Cognizant Technology Solutions the TSR over the last 5 years was 41%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Cognizant Technology Solutions shareholders gained a total return of 13% during the year. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 7% per year over five year. It is possible that returns will improve along with the business fundamentals. If you would like to research Cognizant Technology Solutions in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.