Zuari Industries (NSE:ZUARIIND) shareholder returns have been incredible, earning 549% in 5 years

Buying shares in the best businesses can build meaningful wealth for you and your family. While the best companies are hard to find, but they can generate massive returns over long periods. Don't believe it? Then look at the Zuari Industries Limited (NSE:ZUARIIND) share price. It's 513% higher than it was five years ago. And this is just one example of the epic gains achieved by some long term investors. Also pleasing for shareholders was the 16% gain in the last three months. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report. Anyone who held for that rewarding ride would probably be keen to talk about it.

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

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In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 last half decade, Zuari Industries became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

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 Zuari Industries' 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). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Zuari Industries' TSR for the last 5 years was 549%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Zuari Industries shareholders are up 3.7% for the year (even including dividends). But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 45% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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. For example, we've discovered 3 warning signs for Zuari Industries (1 doesn't sit too well with us!) that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.