Hi-Tech Pipes (NSE:HITECH) stock performs better than its underlying earnings growth over last five years

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. To wit, the Hi-Tech Pipes Limited (NSE:HITECH) share price has soared 322% over five years. And this is just one example of the epic gains achieved by some long term investors. On top of that, the share price is up 17% in about a quarter. But this could be related to the strong market, which is up 9.5% in the last three months.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

See our latest analysis for Hi-Tech Pipes

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Hi-Tech Pipes achieved compound earnings per share (EPS) growth of 1.6% per year. This EPS growth is lower than the 33% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 46.37.

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

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. It might be well worthwhile taking a look at our free report on Hi-Tech Pipes' earnings, revenue and cash flow.

A Different Perspective

It's good to see that Hi-Tech Pipes has rewarded shareholders with a total shareholder return of 65% in the last twelve months. That's including the dividend. That's better than the annualised return of 34% over half a decade, implying that the company is doing better recently. 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 Hi-Tech Pipes better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Hi-Tech Pipes you should be aware of, and 2 of them make us uncomfortable.

Hi-Tech Pipes is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been 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.