The total return for IIFL Capital Services (NSE:IIFLCAPS) investors has risen faster than earnings growth over the last five years

Simply Wall St · 04/10 01:56

The last three months have been tough on IIFL Capital Services Limited (NSE:IIFLCAPS) shareholders, who have seen the share price decline a rather worrying 35%. But over five years returns have been remarkably great. In fact, during that period, the share price climbed 489%. Impressive! So it might be that some shareholders are taking profits after good performance. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price.

In light of the stock dropping 6.7% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

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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. 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, IIFL Capital Services managed to grow its earnings per share at 27% a year. This EPS growth is slower than the share price growth of 43% 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. That's not necessarily surprising considering the five-year track record of earnings growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

earnings-per-share-growth
NSEI:IIFLCAPS Earnings Per Share Growth April 10th 2025

It might be well worthwhile taking a look at our free report on IIFL Capital Services' earnings, revenue and cash flow .

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for IIFL Capital Services the TSR over the last 5 years was 573%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that IIFL Capital Services shareholders have received a total shareholder return of 39% over one year. And that does include the dividend. However, that falls short of the 46% TSR per annum it has made for shareholders, each year, over five years. 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 IIFL Capital Services that you should be aware of.

But note: IIFL Capital Services may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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