Ugar Sugar Works (NSE:UGARSUGAR) shareholder returns have been impressive, earning 243% in 5 years

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, you can make far more than 100% on a really good stock. Long term The Ugar Sugar Works Limited (NSE:UGARSUGAR) shareholders would be well aware of this, since the stock is up 234% in five years. Better yet, the share price has risen 11% in the last week.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

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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...' 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, Ugar Sugar Works actually saw its EPS drop 1.1% per year.

By glancing at these numbers, we'd posit that the decline in earnings per share is not representative of how the business has changed over the years. Therefore, it's worth taking a look at other metrics to try to understand the share price movements.

On the other hand, Ugar Sugar Works' revenue is growing nicely, at a compound rate of 9.6% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.

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 consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Ugar Sugar Works' earnings, revenue and cash flow.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Ugar Sugar Works' total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Ugar Sugar Works' TSR of 243% over the last 5 years is better than the share price return.

A Different Perspective

While the broader market gained around 3.0% in the last year, Ugar Sugar Works shareholders lost 39%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 28%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Take risks, for example - Ugar Sugar Works has 3 warning signs (and 2 which are a bit concerning) we think you should know about.

Ugar Sugar Works is not the only stock that insiders are buying. For those who like to find lesser know companies 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 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.