Sutlej Textiles and Industries (NSE:SUTLEJTEX) delivers shareholders decent 15% CAGR over 5 years, surging 13% in the last week alone

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you'd generally like to see the share price rise faster than the market. Unfortunately for shareholders, while the Sutlej Textiles and Industries Limited (NSE:SUTLEJTEX) share price is up 81% in the last five years, that's less than the market return. Looking at the last year alone, the stock is up 12%.

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

View our latest analysis for Sutlej Textiles and Industries

Sutlej Textiles and Industries isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

For the last half decade, Sutlej Textiles and Industries can boast revenue growth at a rate of 6.3% per year. That's a fairly respectable growth rate. While the share price has gained 13% per year for five years, that's hardly amazing considering the market also rose. You could even argue that the share price was over optimistic, previously.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Sutlej Textiles and Industries, it has a TSR of 97% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Sutlej Textiles and Industries provided a TSR of 14% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 15% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Sutlej Textiles and Industries (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.