Deepak Nitrite's (NSE:DEEPAKNTR) 54% CAGR outpaced the company's earnings growth over the same five-year period

For many, the main point of investing in the stock market is to achieve spectacular returns. While the best companies are hard to find, but they can generate massive returns over long periods. Just think about the savvy investors who held Deepak Nitrite Limited (NSE:DEEPAKNTR) shares for the last five years, while they gained 760%. If that doesn't get you thinking about long term investing, we don't know what will. And in the last month, the share price has gained 19%. We love happy stories like this one. The company should be really proud of that performance!

Since it's been a strong week for Deepak Nitrite shareholders, let's have a look at trend of the longer term fundamentals.

See our latest analysis for Deepak Nitrite

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...' 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.

During five years of share price growth, Deepak Nitrite achieved compound earnings per share (EPS) growth of 36% per year. This EPS growth is lower than the 54% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

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

Dive deeper into Deepak Nitrite's key metrics by checking this interactive graph of Deepak Nitrite'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 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Deepak Nitrite, it has a TSR of 777% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Deepak Nitrite provided a TSR of 21% over the last twelve months. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 54% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand Deepak Nitrite better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Deepak Nitrite you should know about.

Of course Deepak Nitrite may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com