TVS Motor (NSE:TVSMOTOR) shareholders have earned a 52% CAGR over the last five years

Buying shares in the best businesses can build meaningful wealth for you and your family. And we've seen some truly amazing gains over the years. To wit, the TVS Motor Company Limited (NSE:TVSMOTOR) share price has soared 690% over five years. This just goes to show the value creation that some businesses can achieve. On top of that, the share price is up 27% in about a quarter. We love happy stories like this one. The company should be really proud of that performance!

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, TVS Motor achieved compound earnings per share (EPS) growth of 51% per year. That makes the EPS growth particularly close to the yearly share price growth of 51%. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that TVS Motor has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for TVS Motor the TSR over the last 5 years was 710%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that TVS Motor shareholders have received a total shareholder return of 26% over the last year. Of course, that includes the dividend. However, the TSR over five years, coming in at 52% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 2 warning signs for TVS Motor (1 doesn't sit too well with us) that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Indian exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.