Despite the downward trend in earnings at Ganesha Ecosphere (NSE:GANECOS) the stock soars 14%, bringing five-year gains to 328%

Long term investing can be life changing when you buy and hold the truly great businesses. And we've seen some truly amazing gains over the years. Don't believe it? Then look at the Ganesha Ecosphere Limited (NSE:GANECOS) share price. It's 317% higher than it was five years ago. And this is just one example of the epic gains achieved by some long term investors. Also pleasing for shareholders was the 33% gain in the last three months. But this could be related to the strong market, which is up 20% in the last three months.

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

Check out our latest analysis for Ganesha Ecosphere

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.

Ganesha Ecosphere's earnings per share are down 1.7% per year, despite strong share price performance over five years.

So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

The modest 0.2% dividend yield is unlikely to be propping up the share price. On the other hand, Ganesha Ecosphere's revenue is growing nicely, at a compound rate of 5.3% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Ganesha Ecosphere the TSR over the last 5 years was 328%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Ganesha Ecosphere shareholders are up 27% for the year (even including dividends). But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 34% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand Ganesha Ecosphere better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with Ganesha Ecosphere (including 1 which is a bit unpleasant) .

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Indian exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.