Those who invested in Bharat Heavy Electricals (NSE:BHEL) five years ago are up 761%

Long term investing can be life changing when you buy and hold the truly great businesses. While the best companies are hard to find, but they can generate massive returns over long periods. To wit, the Bharat Heavy Electricals Limited (NSE:BHEL) share price has soared 749% over five years. If that doesn't get you thinking about long term investing, we don't know what will. We note the stock price is up 1.2% in the last seven days. It really delights us to see such great share price performance for investors.

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 markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the last half decade, Bharat Heavy Electricals became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

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

It's probably worth noting that the CEO is paid less than the median at similar sized 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. Dive deeper into the earnings by checking this interactive graph of Bharat Heavy Electricals' earnings, revenue and cash flow.

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. As it happens, Bharat Heavy Electricals' TSR for the last 5 years was 761%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Bharat Heavy Electricals provided a TSR of 1.2% over the last twelve months. But that was short of the market average. If we look back over five years, the returns are even better, coming in at 54% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

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.