Kitex Garments' (NSE:KITEX) five-year earnings growth trails the 56% YoY shareholder returns

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 Kitex Garments Limited (NSE:KITEX) share price. It's 791% higher than it was five years ago. This just goes to show the value creation that some businesses can achieve. It's also good to see the share price up 71% over the last quarter. It really delights us to see such great share price performance for investors.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

Check out our latest analysis for Kitex Garments

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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, Kitex Garments managed to grow its earnings per share at 2.1% a year. This EPS growth is lower than the 55% 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. And that's hardly shocking given the track record of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 55.76.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It might be well worthwhile taking a look at our free report on Kitex Garments' 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 Kitex Garments, it has a TSR of 825% 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

We're pleased to report that Kitex Garments shareholders have received a total shareholder return of 266% over one year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 56% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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 learn about the 3 warning signs we've spotted with Kitex Garments (including 2 which make us uncomfortable) .

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.