Shriram Pistons & Rings' (NSE:SHRIPISTON) five-year earnings growth trails the 41% YoY shareholder returns

Long term investing can be life changing when you buy and hold the truly great businesses. And we've seen some truly amazing gains over the years. To wit, the Shriram Pistons & Rings Limited (NSE:SHRIPISTON) share price has soared 441% over five years. This just goes to show the value creation that some businesses can achieve. It's also good to see the share price up 12% over the last quarter. But this could be related to the strong market, which is up 10% in the last three months.

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

Check out our latest analysis for Shriram Pistons & Rings

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Over half a decade, Shriram Pistons & Rings managed to grow its earnings per share at 31% a year. This EPS growth is slower than the share price growth of 40% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

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 Shriram Pistons & Rings has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Shriram Pistons & Rings' financial health with this free 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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Shriram Pistons & Rings the TSR over the last 5 years was 467%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Shriram Pistons & Rings has rewarded shareholders with a total shareholder return of 94% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 41% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Shriram Pistons & Rings better, we need to consider many other factors. For example, we've discovered 1 warning sign for Shriram Pistons & Rings that you should be aware of before investing here.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.