Shriram Pistons & Rings (NSE:SHRIPISTON) sheds 5.6% this week, as yearly returns fall more in line with earnings growth

We think all investors should try to buy and hold high quality multi-year winners. While the best companies are hard to find, but they can generate massive returns over long periods. For example, the Shriram Pistons & Rings Limited (NSE:SHRIPISTON) share price is up a whopping 486% in the last half decade, a handsome return for long term holders. And this is just one example of the epic gains achieved by some long term investors. It's down 5.6% in the last seven days.

Since the long term performance has been good but there's been a recent pullback of 5.6%, let's check if the fundamentals match the share price.

See our latest analysis for Shriram Pistons & Rings

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...' 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.

Over half a decade, Shriram Pistons & Rings managed to grow its earnings per share at 33% a year. This EPS growth is lower than the 42% 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).

We know that Shriram Pistons & Rings has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Shriram Pistons & Rings' balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Shriram Pistons & Rings, it has a TSR of 515% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Shriram Pistons & Rings has rewarded shareholders with a total shareholder return of 62% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 44% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Even so, be aware that Shriram Pistons & Rings is showing 1 warning sign in our investment analysis , you should know about...

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.