Madras Fertilizers (NSE:MADRASFERT) shareholder returns have been fantastic, earning 347% in 5 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. For example, the Madras Fertilizers Limited (NSE:MADRASFERT) share price is up a whopping 347% in the last half decade, a handsome return for long term holders. This just goes to show the value creation that some businesses can achieve. It's also good to see the share price up 26% over the last quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.

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

Check out our latest analysis for Madras Fertilizers

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).

During the last half decade, Madras Fertilizers became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. Indeed, the Madras Fertilizers share price has gained 207% in three years. During the same period, EPS grew by 25% each year. This EPS growth is lower than the 45% average annual increase in the share price over three years. So it's fair to assume the market has a higher opinion of the business than it did three years ago.

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

This free interactive report on Madras Fertilizers' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Madras Fertilizers shareholders gained a total return of 34% during the year. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 35% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand Madras Fertilizers better, we need to consider many other factors. For instance, we've identified 4 warning signs for Madras Fertilizers (2 shouldn't be ignored) that you should be aware of.

Of course Madras Fertilizers may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.