Kabra Extrusiontechnik's (NSE:KABRAEXTRU) five-year earnings growth trails the 46% YoY shareholder returns

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. To wit, the Kabra Extrusiontechnik Limited (NSE:KABRAEXTRU) share price has soared 526% over five years. If that doesn't get you thinking about long term investing, we don't know what will. Better yet, the share price has risen 11% in the last week. We love happy stories like this one. The company should be really proud of that performance!

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

Check out our latest analysis for Kabra Extrusiontechnik

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. 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).

During five years of share price growth, Kabra Extrusiontechnik achieved compound earnings per share (EPS) growth of 5.7% per year. This EPS growth is lower than the 44% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth. This optimism is visible in its fairly high P/E ratio of 50.04.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It might be well worthwhile taking a look at our free report on Kabra Extrusiontechnik's earnings, revenue and cash flow.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Kabra Extrusiontechnik the TSR over the last 5 years was 569%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Kabra Extrusiontechnik shareholders are down 4.4% for the year (even including dividends), but the market itself is up 41%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 46%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 2 warning signs we've spotted with Kabra Extrusiontechnik .

We will like Kabra Extrusiontechnik better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.