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    LIC Housing Finance (NSE:LICHSGFIN) shareholders have earned a 22% CAGR over the last five years

    Simply Wall St·03/27/2025 00:02:35
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    The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on a lighter note, a good company can see its share price rise well over 100%. Long term LIC Housing Finance Limited (NSE:LICHSGFIN) shareholders would be well aware of this, since the stock is up 141% in five years. In the last week the share price is up 2.1%.

    With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

    To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, LIC Housing Finance managed to grow its earnings per share at 12% a year. This EPS growth is slower than the share price growth of 19% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.

    The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

    earnings-per-share-growth
    NSEI:LICHSGFIN Earnings Per Share Growth March 27th 2025

    It's probably worth noting that the CEO is paid less than the median at similar sized 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. This free interactive report on LIC Housing Finance's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

    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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of LIC Housing Finance, it has a TSR of 166% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

    A Different Perspective

    LIC Housing Finance shareholders are down 3.8% for the year (even including dividends), but the market itself is up 6.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 22% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - LIC Housing Finance has 2 warning signs (and 1 which is significant) we think you should know about.

    If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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