Nahar Poly Films (NSE:NAHARPOLY) shareholders notch a 60% CAGR over 5 years, yet earnings have been shrinking

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 Nahar Poly Films Limited (NSE:NAHARPOLY) share price is up a whopping 902% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. Also pleasing for shareholders was the 78% gain in the last three months. It really delights us to see such great share price performance for investors.

Since the stock has added ₹1.4b 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 Nahar Poly Films

Given that Nahar Poly Films only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

For the last half decade, Nahar Poly Films can boast revenue growth at a rate of 23% per year. That's well above most pre-profit companies. Fortunately, the market has not missed this, and has pushed the share price up by 59% per year in that time. It's never too late to start following a top notch stock like Nahar Poly Films, since some long term winners go on winning for decades. So we'd recommend you take a closer look at this one, but keep in mind the market seems optimistic.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Nahar Poly Films, it has a TSR of 952% 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 Nahar Poly Films has rewarded shareholders with a total shareholder return of 53% in the last twelve months. Of course, that includes the dividend. However, that falls short of the 60% TSR per annum it has made for shareholders, each year, over five years. It's always interesting to track share price performance over the longer term. But to understand Nahar Poly Films better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Nahar Poly Films you should be aware of.

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.