Those who invested in Schaeffler India (NSE:SCHAEFFLER) five years ago are up 332%

Buying shares in the best businesses can build meaningful wealth for you and your family. And highest quality companies can see their share prices grow by huge amounts. For example, the Schaeffler India Limited (NSE:SCHAEFFLER) share price is up a whopping 315% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. In the last week the share price is up 1.8%.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

Check out our latest analysis for Schaeffler India

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Schaeffler India achieved compound earnings per share (EPS) growth of 18% per year. This EPS growth is lower than the 33% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth. This optimism is visible in its fairly high P/E ratio of 62.01.

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

Dive deeper into Schaeffler India's key metrics by checking this interactive graph of Schaeffler India's 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Schaeffler India, it has a TSR of 332% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Schaeffler India shareholders are up 20% for the year (even including dividends). But that was short of the market average. On the bright side, the longer term returns (running at about 34% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand Schaeffler India better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Schaeffler India .

We will like Schaeffler India 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.