Chemfab Alkalis' (NSE:CHEMFAB) three-year earnings growth trails the enviable shareholder returns

We think that it's fair to say that the possibility of finding fantastic multi-year winners is what motivates many investors. But when you hold the right stock for the right time period, the rewards can be truly huge. One such superstar is Chemfab Alkalis Limited (NSE:CHEMFAB), which saw its share price soar 314% in three years. It's also good to see the share price up 43% over the last quarter.

Since the stock has added ₹902m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Chemfab Alkalis

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Chemfab Alkalis was able to grow its EPS at 88% per year over three years, sending the share price higher. The average annual share price increase of 61% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into Chemfab Alkalis' key metrics by checking this interactive graph of Chemfab Alkalis's 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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Chemfab Alkalis' TSR for the last 3 years was 317%, 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

We're pleased to report that Chemfab Alkalis shareholders have received a total shareholder return of 92% over one year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 30% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Chemfab Alkalis better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with Chemfab Alkalis (including 1 which is concerning) .

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.