If you want to compound wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual stocks, you could make more than that. To wit, the IDFC First Bank Limited (NSE:IDFCFIRSTB) share price is 10% higher than it was a year ago, much better than the market return of around -0.8% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! However, the stock hasn't done so well in the longer term, with the stock only up 1.0% in three years.

See our latest analysis for IDFC First Bank

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 the last year, IDFC First Bank actually saw its earnings per share drop 14%. So we don't think that investors are paying too much attention to 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.

We doubt the modest 1.4% dividend yield is doing much to support the share price. However the year on year revenue growth of 3.0% would help. Many businesses do go through a faze where they have to forgo some profits to drive business development, and sometimes its for the best.

The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of IDFC First Bank, it has a TSR of 13% for the last year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that IDFC First Bank shareholders have gained 13% (in total) over the last year. That includes the value of the dividend. That gain actually surpasses the 1.6% TSR it generated (per year) over three years. Given the track record of solid returns over varying time frames, it might be worth putting IDFC First Bank on your watchlist. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of IDFC First Bank by clicking this link.