JK Paper's (NSE:JKPAPER) five-year earnings growth trails the 36% YoY shareholder returns

While JK Paper Limited (NSE:JKPAPER) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 15% in the last quarter. But over five years returns have been remarkably great. In that time, the share price has soared some 321% higher! Arguably, the recent fall is to be expected after such a strong rise. But the real question is whether the business fundamentals can improve over the long term.

Since the stock has added ₹6.8b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View 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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over half a decade, JK Paper managed to grow its earnings per share at 18% a year. This EPS growth is lower than the 33% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that JK Paper has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on JK Paper's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of JK Paper, it has a TSR of 368% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

JK Paper shareholders are up 29% for the year (even including dividends). Unfortunately this falls short of the market return. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 36% over five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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. Case in point: We've spotted 1 warning sign for JK Paper 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.