Despite the downward trend in earnings at Summit Securities (NSE:SUMMITSEC) the stock surges 10%, bringing five-year gains to 508%

Long term investing can be life changing when you buy and hold the truly great businesses. And highest quality companies can see their share prices grow by huge amounts. For example, the Summit Securities Limited (NSE:SUMMITSEC) share price is up a whopping 508% in the last half decade, a handsome return for long term holders. This just goes to show the value creation that some businesses can achieve. It's also good to see the share price up 44% over the last quarter. It really delights us to see such great share price performance for investors.

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

See our latest analysis for Summit Securities

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, Summit Securities actually saw its EPS drop 8.1% 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.

The revenue reduction of 4.4% per year is not a positive. So it seems one might have to take closer look at earnings and revenue trends to see how they might influence the share price.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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. Dive deeper into the earnings by checking this interactive graph of Summit Securities' earnings, revenue and cash flow.

A Different Perspective

It's nice to see that Summit Securities shareholders have received a total shareholder return of 183% over the last year. That's better than the annualised return of 43% 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. 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Summit Securities (of which 1 can't be ignored!) you should know about.

We will like Summit Securities better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider 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.