Those who invested in Uno Minda (NSE:UNOMINDA) five years ago are up 656%

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 Uno Minda Limited (NSE:UNOMINDA) share price is up a whopping 649% 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. On top of that, the share price is up 12% 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.

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While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

During the five years of share price growth, Uno Minda moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Uno Minda share price is up 124% in the last three years. In the same period, EPS is up 29% per year. That makes the EPS growth rather close to the annualized share price gain of 31% over the same period. That suggests that the market sentiment around the company hasn't changed much over that time. Arguably the share price is reflecting the earnings per share.

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

We know that Uno Minda has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Uno Minda's TSR for the last 5 years was 656%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Uno Minda shareholders have received a total shareholder return of 29% over the last year. And that does include the dividend. Having said that, the five-year TSR of 50% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. Is Uno Minda cheap compared to other companies? These 3 valuation measures might help you decide.

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.