Ester Industries (NSE:ESTER) delivers shareholders massive 38% CAGR over 5 years, surging 13% in the last week alone

For many, the main point of investing in the stock market is to achieve spectacular returns. And we've seen some truly amazing gains over the years. Don't believe it? Then look at the Ester Industries Limited (NSE:ESTER) share price. It's 358% higher than it was five years ago. 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 14%. This could be related to the recent financial results that were recently released - you could check the most recent data by reading our company report.

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

See our latest analysis for Ester Industries

Ester Industries isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

For the last half decade, Ester Industries can boast revenue growth at a rate of 2.6% per year. That's not a very high growth rate considering the bottom line. Therefore, we're a little surprised to see the share price gain has been so strong, at 36% per year, compound, over the period. We'll tip our hats to that, any day, but the top-line growth isn't particularly impressive when you compare it to other pre-profit companies. It's not immediately obvious to us why the market has been so enthusiastic about the stock, but a more detailed look at revenue and profit trends might reveal why shareholders are optimistic.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Ester Industries' total shareholder return (TSR) and its share price return. 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. Its history of dividend payouts mean that Ester Industries' TSR of 399% over the last 5 years is better than the share price return.

A Different Perspective

It's good to see that Ester Industries has rewarded shareholders with a total shareholder return of 88% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 38% 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 Ester Industries better, we need to consider many other factors. Case in point: We've spotted 4 warning signs for Ester Industries you should be aware of, and 2 of them are concerning.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.