Olectra Greentech's (NSE:OLECTRA) five-year total shareholder returns outpace the underlying earnings growth

Some Olectra Greentech Limited (NSE:OLECTRA) shareholders are probably rather concerned to see the share price fall 31% over the last three months. But that does not change the realty that the stock's performance has been terrific, over five years. In fact, during that period, the share price climbed 896%. Impressive! 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. Anyone who held for that rewarding ride would probably be keen to talk about it.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, Olectra Greentech managed to grow its earnings per share at 79% a year. The EPS growth is more impressive than the yearly share price gain of 58% over the same period. So it seems the market isn't so enthusiastic about the stock these days. Of course, with a P/E ratio of 65.14, the market remains optimistic.

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

It is of course excellent to see how Olectra Greentech has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Olectra Greentech stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Investors in Olectra Greentech had a tough year, with a total loss of 25% (including dividends), against a market gain of about 0.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 58% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Olectra Greentech better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Olectra Greentech .

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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.