Investors more bullish on Butterfly Gandhimathi Appliances (NSE:BUTTERFLY) this week as stock swells 17%, despite earnings trending downwards over past five years

For many, the main point of investing in the stock market is to achieve spectacular returns. While the best companies are hard to find, but they can generate massive returns over long periods. To wit, the Butterfly Gandhimathi Appliances Limited (NSE:BUTTERFLY) share price has soared 546% over five years. If that doesn't get you thinking about long term investing, we don't know what will. It's also up 18% in about a month. We love happy stories like this one. The company should be really proud of that performance!

Since it's been a strong week for Butterfly Gandhimathi Appliances shareholders, let's have a look at trend of the longer term fundamentals.

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Given that Butterfly Gandhimathi Appliances only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

For the last half decade, Butterfly Gandhimathi Appliances can boast revenue growth at a rate of 5.3% per year. Put simply, that growth rate fails to impress. Therefore, we're a little surprised to see the share price gain has been so strong, at 45% per year, compound, over the period. We'll tip our hats to that, any day, but the top-line growth isn't particularly impressive when you compare it to other pre-profit companies. Having said that, a closer look at the numbers might surface good reasons to believe that profits will gush in the future.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

If you are thinking of buying or selling Butterfly Gandhimathi Appliances stock, you should check out this FREE detailed report on its balance sheet.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Butterfly Gandhimathi Appliances' 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 Butterfly Gandhimathi Appliances shareholders, and that cash payout contributed to why its TSR of 552%, over the last 5 years, is better than the share price return.

A Different Perspective

While the broader market gained around 4.3% in the last year, Butterfly Gandhimathi Appliances shareholders lost 17%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 45%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Butterfly Gandhimathi Appliances better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Butterfly Gandhimathi Appliances (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

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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.