Paisalo Digital (NSE:PAISALO) jumps 13% this week, though earnings growth is still tracking behind five-year shareholder returns

Paisalo Digital Limited (NSE:PAISALO) shareholders might be concerned after seeing the share price drop 22% in the last quarter. But that doesn't change the fact that shareholders have received really good returns over the last five years. In fact, the share price is 126% higher today. We think it's more important to dwell on the long term returns than the short term returns. Of course, that doesn't necessarily mean it's cheap now.

The past week has proven to be lucrative for Paisalo Digital investors, so let's see if fundamentals drove the company's five-year performance.

View our latest analysis for Paisalo Digital

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, Paisalo Digital managed to grow its earnings per share at 27% a year. This EPS growth is higher than the 18% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.

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

It is of course excellent to see how Paisalo Digital has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Paisalo Digital stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Paisalo Digital shareholders gained a total return of 18% during the year. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 18% over half a decade This suggests the company might be improving over time. 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. Even so, be aware that Paisalo Digital is showing 1 warning sign in our investment analysis , you should know about...

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.