WEBULL

HFCL (NSE:HFCL) shareholders notch a 18% CAGR over 5 years, yet earnings have been shrinking

Simply Wall St · 01/05 00:05

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For example, the HFCL Limited (NSE:HFCL) share price has soared 125% in the last half decade. Most would be very happy with that. And in the last week the share price has popped 10%.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, HFCL actually saw its EPS drop 27% per year.

Essentially, it doesn't seem likely that investors are focused on EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

The modest 0.1% dividend yield is unlikely to be propping up the share price. It is not great to see that revenue has dropped by 0.5% per year over five years. It certainly surprises us that the share price is up, but perhaps a closer examination of the data will yield answers.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

earnings-and-revenue-growth
NSEI:HFCL Earnings and Revenue Growth January 5th 2026

If you are thinking of buying or selling HFCL stock, you should check out this FREE detailed report on its balance sheet.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for HFCL the TSR over the last 5 years was 127%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

HFCL shareholders are down 41% for the year (even including dividends), but the market itself is up 4.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 18%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Even so, be aware that HFCL is showing 2 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

We will like HFCL better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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 Indian exchanges.