Those who invested in Multi Commodity Exchange of India (NSE:MCX) three years ago are up 515%

Investing can be hard but the potential fo an individual stock to pay off big time inspires us. You won't get it right every time, but when you do, the returns can be truly splendid. Take, for example, the Multi Commodity Exchange of India Limited (NSE:MCX) share price, which skyrocketed 506% over three years. It's also good to see the share price up 19% over the last quarter. It really delights us to see such great share price performance for investors.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Multi Commodity Exchange of India was able to grow its EPS at 65% per year over three years, sending the share price higher. In comparison, the 82% per year gain in the share price outpaces the EPS growth. So it's fair to assume the market has a higher opinion of the business than it did three years ago. 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 72.75.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Multi Commodity Exchange of India, it has a TSR of 515% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Multi Commodity Exchange of India shareholders have received a total shareholder return of 42% over one year. That's including the dividend. However, that falls short of the 42% TSR per annum it has made for shareholders, each year, over five years. It's always interesting to track share price performance over the longer term. But to understand Multi Commodity Exchange of India better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Multi Commodity Exchange of India , and understanding them should be part of your investment process.

But note: Multi Commodity Exchange of India 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.