JK Paper (NSE:JKPAPER) stock performs better than its underlying earnings growth over last five years

Buying shares in the best businesses can build meaningful wealth for you and your family. And we've seen some truly amazing gains over the years. Just think about the savvy investors who held JK Paper Limited (NSE:JKPAPER) shares for the last five years, while they gained 330%. And this is just one example of the epic gains achieved by some long term investors. Also pleasing for shareholders was the 68% gain in the last three months.

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

See our latest analysis for JK Paper

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Over half a decade, JK Paper managed to grow its earnings per share at 22% a year. This EPS growth is lower than the 34% 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. 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).

It is of course excellent to see how JK Paper has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at JK Paper's financial health with this free report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for JK Paper the TSR over the last 5 years was 388%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that JK Paper shareholders have received a total shareholder return of 73% over the last year. That's including the dividend. That gain is better than the annual TSR over five years, which is 37%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand JK Paper better, we need to consider many other factors. Even so, be aware that JK Paper is showing 1 warning sign in our investment analysis , you should know about...

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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