Maharashtra Scooters' (NSE:MAHSCOOTER) 36% CAGR outpaced the company's earnings growth over the same three-year period

It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But if you buy shares in a really great company, you can more than double your money. For instance the Maharashtra Scooters Ltd. (NSE:MAHSCOOTER) share price is 130% higher than it was three years ago. That sort of return is as solid as granite. In more good news, the share price has risen 13% in thirty days.

Since the stock has added ₹5.7b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Maharashtra Scooters

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.

Maharashtra Scooters was able to grow its EPS at 21% per year over three years, sending the share price higher. In comparison, the 32% per year gain in the share price outpaces the EPS growth. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. That's not necessarily surprising considering the three-year track record of earnings growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 45.46.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on Maharashtra Scooters' earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. We note that for Maharashtra Scooters the TSR over the last 3 years was 149%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Maharashtra Scooters has rewarded shareholders with a total shareholder return of 78% in the last twelve months. That's including the dividend. That's better than the annualised return of 18% 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 Maharashtra Scooters better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Maharashtra Scooters .

But note: Maharashtra Scooters 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.