Despite lower earnings than five years ago, Bharat Heavy Electricals (NSE:BHEL) investors are up 384% since then

While Bharat Heavy Electricals Limited (NSE:BHEL) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 19% in the last quarter. But over five years returns have been remarkably great. Indeed, the share price is up a whopping 379% in that time. Arguably, the recent fall is to be expected after such a strong rise. But the real question is whether the business fundamentals can improve over the long term.

Since the long term performance has been good but there's been a recent pullback of 7.9%, let's check if the fundamentals match the share price.

Check out our latest analysis for Bharat Heavy Electricals

We don't think that Bharat Heavy Electricals' modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

For the last half decade, Bharat Heavy Electricals can boast revenue growth at a rate of 0.7% per year. That's not a very high growth rate considering the bottom line. Therefore, we're a little surprised to see the share price gain has been so strong, at 37% per year, compound, over the period. We don't think the growth over the period is that great, but it could be that faster growth appears to some to be on the horizon. It's not immediately obvious to us why the market has been so enthusiastic about the stock, but a more detailed look at revenue and profit trends might reveal why shareholders are optimistic.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. If you are thinking of buying or selling Bharat Heavy Electricals stock, you should check out this free report showing analyst profit 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. We note that for Bharat Heavy Electricals the TSR over the last 5 years was 384%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Bharat Heavy Electricals shareholders have received a total shareholder return of 110% over one year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 37% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. You could get a better understanding of Bharat Heavy Electricals' growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

But note: Bharat Heavy Electricals 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.