Shriram Pistons & Rings' (NSE:SHRIPISTON) 57% CAGR outpaced the company's earnings growth over the same five-year period

Buying shares in the best businesses can build meaningful wealth for you and your family. While not every stock performs well, when investors win, they can win big. To wit, the Shriram Pistons & Rings Limited (NSE:SHRIPISTON) share price has soared 813% over five years. If that doesn't get you thinking about long term investing, we don't know what will. Better yet, the share price has risen 7.9% in the last week. But this could be related to the buoyant market which is up about 5.7% in a week. We love happy stories like this one. The company should be really proud of that performance!

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

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, Shriram Pistons & Rings managed to grow its earnings per share at 36% a year. This EPS growth is lower than the 56% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

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

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Shriram Pistons & Rings' TSR for the last 5 years was 850%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Shriram Pistons & Rings shareholders are down 1.6% for the year (even including dividends), but the market itself is up 5.6%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 57%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Shriram Pistons & Rings you should know about.

But note: Shriram Pistons & Rings 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.