ZF Commercial Vehicle Control Systems India's (NSE:ZFCVINDIA) earnings growth rate lags the 21% CAGR delivered to shareholders

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on a lighter note, a good company can see its share price rise well over 100%. For instance, the price of ZF Commercial Vehicle Control Systems India Limited (NSE:ZFCVINDIA) stock is up an impressive 163% over the last five years. On top of that, the share price is up 17% in about a quarter.

Since the long term performance has been good but there's been a recent pullback of 5.1%, let's check if the fundamentals match the share price.

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While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Over half a decade, ZF Commercial Vehicle Control Systems India managed to grow its earnings per share at 46% a year. This EPS growth is higher than the 21% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. Having said that, the market is still optimistic, given the P/E ratio of 58.01.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that ZF Commercial Vehicle Control Systems India has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at ZF Commercial Vehicle Control Systems India's financial health with this free report on its balance sheet.

A Different Perspective

It's nice to see that ZF Commercial Vehicle Control Systems India shareholders have received a total shareholder return of 25% over the last year. And that does include the dividend. That's better than the annualised return of 21% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before forming an opinion on ZF Commercial Vehicle Control Systems India you might want to consider these 3 valuation metrics.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.