Godrej Properties' (NSE:GODREJPROP) three-year earnings growth trails the 20% YoY shareholder returns
By buying an index fund, you can roughly match the market return with ease. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, Godrej Properties Limited (NSE:GODREJPROP) shareholders have seen the share price rise 72% over three years, well in excess of the market return (53%, not including dividends).
Since it's been a strong week for Godrej Properties shareholders, let's have a look at trend of the longer term fundamentals.
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. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Godrej Properties was able to grow its EPS at 53% per year over three years, sending the share price higher. The average annual share price increase of 20% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Godrej Properties has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Godrej Properties' financial health with this free report on its balance sheet.
A Different Perspective
Investors in Godrej Properties had a tough year, with a total loss of 24%, against a market gain of about 3.1%. 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. On the bright side, long term shareholders have made money, with a gain of 7% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with Godrej Properties .
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 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.