Gujarat Fluorochemicals (NSE:FLUOROCHEM) shareholders notch a 47% CAGR over 5 years, yet earnings have been shrinking

We think all investors should try to buy and hold high quality multi-year winners. And we've seen some truly amazing gains over the years. To wit, the Gujarat Fluorochemicals Limited (NSE:FLUOROCHEM) share price has soared 595% over five years. If that doesn't get you thinking about long term investing, we don't know what will. It's also good to see the share price up 50% over the last quarter. Anyone who held for that rewarding ride would probably be keen to talk about it.

Since the stock has added ₹24b 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 Gujarat Fluorochemicals

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the five years of share price growth, Gujarat Fluorochemicals moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

This free interactive report on Gujarat Fluorochemicals' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. We note that for Gujarat Fluorochemicals the TSR over the last 5 years was 597%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Gujarat Fluorochemicals shareholders have received a total shareholder return of 79% over the last year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 47%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Gujarat Fluorochemicals better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Gujarat Fluorochemicals you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.