The total return for Sundram Fasteners (NSE:SUNDRMFAST) investors has risen faster than earnings growth over the last five years

The main point of investing for the long term is to make money. Better yet, you'd like to see the share price move up more than the market average. But Sundram Fasteners Limited (NSE:SUNDRMFAST) has fallen short of that second goal, with a share price rise of 65% over five years, which is below the market return. The last year has been disappointing, with the stock price down 22% in that time.

Although Sundram Fasteners has shed ₹7.4b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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, Sundram Fasteners managed to grow its earnings per share at 19% a year. The EPS growth is more impressive than the yearly share price gain of 11% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.

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

Dive deeper into Sundram Fasteners' key metrics by checking this interactive graph of Sundram Fasteners's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Sundram Fasteners' TSR for the last 5 years was 72%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Sundram Fasteners shareholders are down 21% for the year (even including dividends), but the market itself is up 0.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 11% per year over half a decade. 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. Even so, be aware that Sundram Fasteners is showing 1 warning sign in our investment analysis , you should know about...

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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.