Safari Industries (India)'s (NSE:SAFARI) five-year earnings growth trails the fantastic shareholder returns

For many, the main point of investing in the stock market is to achieve spectacular returns. While not every stock performs well, when investors win, they can win big. To wit, the Safari Industries (India) Limited (NSE:SAFARI) share price has soared 805% over five years. This just goes to show the value creation that some businesses can achieve. It's also up 15% in about a month. This could be related to the recent financial results that were recently released - you could check the most recent data by reading our company report. It really delights us to see such great share price performance for investors.

Since it's been a strong week for Safari Industries (India) shareholders, let's have a look at trend of the longer term fundamentals.

See our latest analysis for Safari Industries (India)

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Safari Industries (India) achieved compound earnings per share (EPS) growth of 37% per 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. That's not necessarily surprising considering the five-year track record of earnings growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 79.24.

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

It is of course excellent to see how Safari Industries (India) has grown profits over the years, but the future is more important for shareholders. This free interactive report on Safari Industries (India)'s balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Safari Industries (India)'s TSR for the last 5 years was 809%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Safari Industries (India) provided a TSR of 19% over the last twelve months. But that was short of the market average. If we look back over five years, the returns are even better, coming in at 55% per year for five years. 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 Safari Industries (India) better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Safari Industries (India) (at least 1 which is potentially serious) , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.