Deepak Fertilisers And Petrochemicals (NSE:DEEPAKFERT) sheds 5.5% this week, as yearly returns fall more in line with earnings growth

Long term investing can be life changing when you buy and hold the truly great businesses. While the best companies are hard to find, but they can generate massive returns over long periods. For example, the Deepak Fertilisers And Petrochemicals Corporation Limited (NSE:DEEPAKFERT) share price is up a whopping 843% in the last half decade, a handsome return for long term holders. This just goes to show the value creation that some businesses can achieve. It's down 5.5% in the last seven days. It really delights us to see such great share price performance for investors.

While the stock has fallen 5.5% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

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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.

Over half a decade, Deepak Fertilisers And Petrochemicals managed to grow its earnings per share at 23% a year. This EPS growth is slower than the share price growth of 57% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Deepak Fertilisers And Petrochemicals has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Deepak Fertilisers And Petrochemicals, it has a TSR of 901% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Deepak Fertilisers And Petrochemicals' TSR for the year was broadly in line with the market average, at 6.1%. It has to be noted that the recent return falls short of the 59% shareholders have gained each year, over half a decade. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes Deepak Fertilisers And Petrochemicals a stock worth watching. It's always interesting to track share price performance over the longer term. But to understand Deepak Fertilisers And Petrochemicals better, we need to consider many other factors. Even so, be aware that Deepak Fertilisers And Petrochemicals is showing 2 warning signs in our investment analysis , you should know about...

We will like Deepak Fertilisers And Petrochemicals better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.