Repco Home Finance’s (NSE:REPCOHOME) 99% return outpaced the company’s earnings growth over the same one-year period

The simplest way to invest in stocks is to buy exchange traded funds. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Repco Home Finance Limited (NSE:REPCOHOME) share price is 97% higher than it was a year ago, much better than the market return of around 39% (not including dividends) in the same period. That’s a solid performance by our standards! And shareholders have also done well over the long term, with an increase of 72% in the last three years.

Since the stock has added ₹3.6b to its market cap in the past week alone, let’s see if underlying performance has been driving long-term returns.

View our latest analysis for Repco Home Finance

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…’ 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.

During the last year Repco Home Finance grew its earnings per share (EPS) by 70%. This EPS growth is significantly lower than the 97% increase in the share price. This indicates that the market is now more optimistic about the stock.

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

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 Repco Home Finance’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

It’s good to see that Repco Home Finance has rewarded shareholders with a total shareholder return of 99% in the last twelve months. And that does include the dividend. That’s better than the annualised return of 4% 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. 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. For instance, we’ve identified 2 warning signs for Repco Home Finance (1 is a bit unpleasant) that you should be aware of.

Of course Repco Home Finance may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.