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Can You Imagine How Chuffed Motilal Oswal Financial Services's (NSE:MOTILALOFS) Shareholders Feel About Its 176% Share Price Gain?

Simply Wall St

While Motilal Oswal Financial Services Limited (NSE:MOTILALOFS) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 25% in the last quarter. But that scarcely detracts from the really solid long term returns generated by the company over five years. In fact, the share price is 176% higher today. We think it's more important to dwell on the long term returns than the short term returns. Only time will tell if there is still too much optimism currently reflected in the share price.

See our latest analysis for Motilal Oswal Financial Services

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Motilal Oswal Financial Services achieved compound earnings per share (EPS) growth of 40% per year. The EPS growth is more impressive than the yearly share price gain of 23% over the same period. So it seems the market isn't so enthusiastic about the stock these days.

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

NSEI:MOTILALOFS Past and Future Earnings, August 21st 2019

This free interactive report on Motilal Oswal Financial Services's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Motilal Oswal Financial Services's TSR for the last 5 years was 191%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We regret to report that Motilal Oswal Financial Services shareholders are down 33% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 12%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 24% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. If you would like to research Motilal Oswal Financial Services in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

We will like Motilal Oswal Financial Services better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.