Adani Enterprises' (NSE:ADANIENT) 54% CAGR outpaced the company's earnings growth over the same five-year period

Buying shares in the best businesses can build meaningful wealth for you and your family. While the best companies are hard to find, but they can generate massive returns over long periods. To wit, the Adani Enterprises Limited (NSE:ADANIENT) share price has soared 756% over five years. This just goes to show the value creation that some businesses can achieve. We note the stock price is up 3.8% in the last seven days. Anyone who held for that rewarding ride would probably be keen to talk about it.

The past week has proven to be lucrative for Adani Enterprises investors, so let's see if fundamentals drove the company's five-year performance.

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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.

Over half a decade, Adani Enterprises managed to grow its earnings per share at 60% a year. So the EPS growth rate is rather close to the annualized share price gain of 54% per year. That suggests that the market sentiment around the company hasn't changed much over that time. In fact, the share price seems to largely reflect the EPS growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

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

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Adani Enterprises, it has a TSR of 758% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

We regret to report that Adani Enterprises shareholders are down 19% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 3.8%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 54%, each year, over five years. 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. It's always interesting to track share price performance over the longer term. But to understand Adani Enterprises better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Adani Enterprises you should be aware of, and 1 of them doesn't sit too well with us.

But note: Adani Enterprises may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.