The 13% return this week takes Rane (Madras)'s (NSE:RML) shareholders five-year gains to 348%

For many, the main point of investing in the stock market is to achieve spectacular returns. While the best companies are hard to find, but they can generate massive returns over long periods. Don't believe it? Then look at the Rane (Madras) Limited (NSE:RML) share price. It's 348% higher than it was five years ago. And this is just one example of the epic gains achieved by some long term investors. It's also good to see the share price up 31% over the last quarter.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

We've discovered 1 warning sign about Rane (Madras). View them for free.

Rane (Madras) wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually desire strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last 5 years Rane (Madras) saw its revenue grow at 15% per year. That's a fairly respectable growth rate. Arguably it's more than reflected in the very strong share price gain of 35% a year over a half a decade. We usually like strong growth stocks but it does seem the market already appreciates this one quite well!

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

Rane (Madras) shareholders are up 1.1% for the year. But that was short of the market average. If we look back over five years, the returns are even better, coming in at 35% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand Rane (Madras) better, we need to consider many other factors. For example, we've discovered 1 warning sign for Rane (Madras) that you should be aware of before investing here.

But note: Rane (Madras) 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.

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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.