Investors more bullish on Apollo Sindoori Hotels (NSE:APOLSINHOT) this week as stock surges 12%, despite earnings trending downwards over past five years

When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Apollo Sindoori Hotels Limited (NSE:APOLSINHOT) share price has soared 134% in the last half decade. Most would be very happy with that. It's also good to see the share price up 21% over the last quarter.

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 Apollo Sindoori Hotels

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, Apollo Sindoori Hotels actually saw its EPS drop 15% per year.

Essentially, it doesn't seem likely that investors are focused on EPS. 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.

We doubt the modest 0.1% dividend yield is attracting many buyers to the stock. In contrast revenue growth of 27% per year is probably viewed as evidence that Apollo Sindoori Hotels is growing, a real positive. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

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

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Apollo Sindoori Hotels the TSR over the last 5 years was 137%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Apollo Sindoori Hotels shareholders are up 8.8% for the year (even including dividends). Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 19% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand Apollo Sindoori Hotels better, we need to consider many other factors. Even so, be aware that Apollo Sindoori Hotels is showing 4 warning signs in our investment analysis , and 1 of those makes us a bit 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.