Sarla Performance Fibers (NSE:SARLAPOLY) stock performs better than its underlying earnings growth over last five years

When you buy a stock there is always a possibility that it could drop 100%. But on a lighter note, a good company can see its share price rise well over 100%. For instance, the price of Sarla Performance Fibers Limited (NSE:SARLAPOLY) stock is up an impressive 165% over the last five years. In more good news, the share price has risen 22% in thirty days.

Since the stock has added ₹585m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Sarla Performance Fibers

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Over half a decade, Sarla Performance Fibers managed to grow its earnings per share at 13% a year. This EPS growth is lower than the 22% 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.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into Sarla Performance Fibers' key metrics by checking this interactive graph of Sarla Performance Fibers's earnings, revenue and cash flow.

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Sarla Performance Fibers' total shareholder return (TSR) and its share price return. 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. Its history of dividend payouts mean that Sarla Performance Fibers' TSR of 188% over the last 5 years is better than the share price return.

A Different Perspective

We're pleased to report that Sarla Performance Fibers shareholders have received a total shareholder return of 69% over one year. That's better than the annualised return of 24% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Sarla Performance Fibers better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Sarla Performance Fibers you should know about.

But note: Sarla Performance Fibers may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.