Dhampur Sugar Mills' (NSE:DHAMPURSUG) earnings growth rate lags the 56% CAGR delivered to shareholders

Dhampur Sugar Mills Limited (NSE:DHAMPURSUG) shareholders have seen the share price descend 20% over the month. In contrast, the return over three years has been impressive. Indeed, the share price is up a very strong 240% in that time. So the recent fall in the share price should be viewed in that context. If the business can perform well for years to come, then the recent drop could be an opportunity.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

See our latest analysis for Dhampur Sugar Mills

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...' 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.

Dhampur Sugar Mills was able to grow its EPS at 22% per year over three years, sending the share price higher. In comparison, the 50% per year gain in the share price outpaces the EPS growth. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It's not unusual to see the market 're-rate' a stock, after a few years of growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It might be well worthwhile taking a look at our free report on Dhampur Sugar Mills' earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Dhampur Sugar Mills, it has a TSR of 279% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Dhampur Sugar Mills shareholders have received a total shareholder return of 124% over the last year. Of course, that includes the dividend. That's better than the annualised return of 25% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Dhampur Sugar Mills better, we need to consider many other factors. Even so, be aware that Dhampur Sugar Mills is showing 3 warning signs in our investment analysis , you should know about...

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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

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This article by Simply Wall St is general in nature. 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.
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