Ester Industries (NSE:ESTER) shareholders are still up 329% over 5 years despite pulling back 10% in the past week

Ester Industries Limited (NSE:ESTER) shareholders might understandably be very concerned that the share price has dropped 35% in the last quarter. But that scarcely detracts from the really solid long term returns generated by the company over five years. We think most investors would be happy with the 294% return, over that period. We think it's more important to dwell on the long term returns than the short term returns. The more important question is whether the stock is too cheap or too expensive today.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

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Given that Ester Industries didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

For the last half decade, Ester Industries can boast revenue growth at a rate of 2.8% per year. That's not a very high growth rate considering the bottom line. So we wouldn't have expected to see the share price to have lifted 32% for each year during that time, but that's what happened. While we wouldn't be overly concerned, it might be worth checking whether you think the fundamental business gains really justify the share price action. It may be that the market is pretty optimistic about Ester Industries.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic .

What About The Total Shareholder Return (TSR)?

We've already covered Ester Industries' share price action, but we should also mention its 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. Its history of dividend payouts mean that Ester Industries' TSR of 329% 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 13% in the last twelve months. Having said that, the five-year TSR of 34% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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. Take risks, for example - Ester Industries has 2 warning signs we think you should be aware of.

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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.