Bajaj Hindusthan Sugar (NSE:BAJAJHIND) soars 10% this week, taking five-year gains to 446%

While Bajaj Hindusthan Sugar Limited (NSE:BAJAJHIND) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 13% in the last quarter. But over five years returns have been remarkably great. In fact, during that period, the share price climbed 446%. Impressive! So we don't think the recent decline in the share price means its story is a sad one. The most important thing for savvy investors to consider is whether the underlying business can justify the share price gain. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 36% drop, in the last year.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

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Bajaj Hindusthan Sugar wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last 5 years Bajaj Hindusthan Sugar saw its revenue shrink by 2.2% per year. This is in stark contrast to the strong share price growth of 40%, compound, per year. Obviously, whatever the market is excited about, it's not a track record of revenue growth. I think it's fair to say there is probably a fair bit of excitement in the price.

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized 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 Bajaj Hindusthan Sugar's earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 6.8% in the last year, Bajaj Hindusthan Sugar shareholders lost 36%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 40%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. You could get a better understanding of Bajaj Hindusthan Sugar's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

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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.