Kothari Petrochemicals' (NSE:KOTHARIPET) 60% CAGR outpaced the company's earnings growth over the same five-year period

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 Kothari Petrochemicals Limited (NSE:KOTHARIPET) share price has soared 905% 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 41% over the last quarter. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report. It really delights us to see such great share price performance for investors.

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

See our latest analysis for Kothari Petrochemicals

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).

Over half a decade, Kothari Petrochemicals managed to grow its earnings per share at 36% a year. This EPS growth is slower than the share price growth of 59% per year, over the same period. 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.

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

This free interactive report on Kothari Petrochemicals' earnings, revenue and cash flow 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Kothari Petrochemicals, it has a TSR of 932% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Kothari Petrochemicals has rewarded shareholders with a total shareholder return of 71% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 60% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 1 warning sign for Kothari Petrochemicals that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.