Magadh Sugar & Energy (NSE:MAGADSUGAR) investors are up 13% in the past week, but earnings have declined over the last three years

We think that it's fair to say that the possibility of finding fantastic multi-year winners is what motivates many investors. You won't get it right every time, but when you do, the returns can be truly splendid. Take, for example, the Magadh Sugar & Energy Limited (NSE:MAGADSUGAR) share price, which skyrocketed 356% over three years. And in the last week the share price has popped 13%.

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.

View our latest analysis for Magadh Sugar & Energy

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 the three years of share price growth, Magadh Sugar & Energy actually saw its earnings per share (EPS) drop 8.1% per year.

Thus, it seems unlikely that the market is focussed on EPS growth at the moment. Given this situation, it makes sense to look at other metrics too.

The modest 2.0% dividend yield is unlikely to be propping up the share price. It could be that the revenue growth of 4.1% per year is viewed as evidence that Magadh Sugar & Energy is growing. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.

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

If you are thinking of buying or selling Magadh Sugar & Energy stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, Magadh Sugar & Energy's TSR for the last 3 years was 387%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Magadh Sugar & Energy shareholders have received a total shareholder return of 3.1% over one year. And that does include the dividend. Having said that, the five-year TSR of 34% a year, is even better. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Magadh Sugar & Energy you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.