Maharashtra Seamless' (NSE:MAHSEAMLES) five-year earnings growth trails the incredible shareholder returns

We think all investors should try to buy and hold high quality multi-year winners. While not every stock performs well, when investors win, they can win big. Don't believe it? Then look at the Maharashtra Seamless Limited (NSE:MAHSEAMLES) share price. It's 301% higher than it was five years ago. And this is just one example of the epic gains achieved by some long term investors. It's even up 8.3% in the last week.

Since the stock has added ₹6.7b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Maharashtra Seamless

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, Maharashtra Seamless managed to grow its earnings per share at 25% a year. This EPS growth is lower than the 32% 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.

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

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. It might be well worthwhile taking a look at our free report on Maharashtra Seamless' earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Maharashtra Seamless, it has a TSR of 324% 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

We regret to report that Maharashtra Seamless shareholders are down 30% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 1.4%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 33%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. To that end, you should be aware of the 1 warning sign we've spotted with Maharashtra Seamless .

Maharashtra Seamless is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been 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.