Kritika Wires' (NSE:KRITIKA) 58% CAGR outpaced the company's earnings growth over the same five-year period

Long term investing can be life changing when you buy and hold the truly great businesses. While not every stock performs well, when investors win, they can win big. Just think about the savvy investors who held Kritika Wires Limited (NSE:KRITIKA) shares for the last five years, while they gained 890%. And this is just one example of the epic gains achieved by some long term investors. It's even up 15% in the last week. We love happy stories like this one. The company should be really proud of that performance!

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

See our latest analysis for Kritika Wires

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, Kritika Wires achieved compound earnings per share (EPS) growth of 15% per year. This EPS growth is lower than the 58% 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 optimism is visible in its fairly high P/E ratio of 52.04.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It might be well worthwhile taking a look at our free report on Kritika Wires' earnings, revenue and cash flow.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Kritika Wires' total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Kritika Wires' TSR of 896% for the 5 years exceeded its share price return, because it has paid dividends.

A Different Perspective

It's good to see that Kritika Wires has rewarded shareholders with a total shareholder return of 246% in the last twelve months. That's better than the annualised return of 58% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for Kritika Wires you should be aware of.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.