Emkay Taps and Cutting Tools' (NSE:EMKAYTOOLS) five-year earnings growth trails the fantastic shareholder returns

Buying shares in the best businesses can build meaningful wealth for you and your family. While not every stock performs well, when investors win, they can win big. Don't believe it? Then look at the Emkay Taps and Cutting Tools Limited (NSE:EMKAYTOOLS) share price. It's 782% higher than it was five years ago. And this is just one example of the epic gains achieved by some long term investors. It's also good to see the share price up 35% over the last quarter. We love happy stories like this one. The company should be really proud of that performance!

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

See our latest analysis for Emkay Taps and Cutting Tools

There is no denying that markets are sometimes efficient, but prices do not always reflect 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).

Over half a decade, Emkay Taps and Cutting Tools managed to grow its earnings per share at 69% a year. This EPS growth is higher than the 55% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days.

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

This free interactive report on Emkay Taps and Cutting Tools' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Emkay Taps and Cutting Tools' total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for Emkay Taps and Cutting Tools shareholders, and that cash payout contributed to why its TSR of 789%, over the last 5 years, is better than the share price return.

A Different Perspective

It's good to see that Emkay Taps and Cutting Tools has rewarded shareholders with a total shareholder return of 112% in the last twelve months. That's better than the annualised return of 55% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for Emkay Taps and Cutting Tools you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.