The 7.2% return this week takes Lemon Tree Hotels' (NSE:LEMONTREE) shareholders three-year gains to 308%

Investing can be hard but the potential fo an individual stock to pay off big time inspires us. But when you hold the right stock for the right time period, the rewards can be truly huge. Take, for example, the Lemon Tree Hotels Limited (NSE:LEMONTREE) share price, which skyrocketed 308% over three years. It's also up 9.1% in about a month. But this could be related to good market conditions -- stocks in its market are up 5.4% in the last month.

The past week has proven to be lucrative for Lemon Tree Hotels investors, so let's see if fundamentals drove the company's three-year performance.

See our latest analysis for Lemon Tree Hotels

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).

Lemon Tree Hotels became profitable within the last three years. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

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 Lemon Tree Hotels has grown profits over the years, but the future is more important for shareholders. This free interactive report on Lemon Tree Hotels' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's nice to see that Lemon Tree Hotels shareholders have received a total shareholder return of 64% over the last year. That gain is better than the annual TSR over five years, which is 14%. Therefore it seems like sentiment around the company has been positive lately. 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. For instance, we've identified 1 warning sign for Lemon Tree Hotels that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Indian exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.