Supreme Petrochem (NSE:SPLPETRO) sheds 5.8% this week, as yearly returns fall more in line with earnings growth

Supreme Petrochem Limited (NSE:SPLPETRO) shareholders might be concerned after seeing the share price drop 18% in the last quarter. But that doesn't undermine the fantastic longer term performance (measured over five years). Indeed, the share price is up a whopping 819% in that time. So it might be that some shareholders are taking profits after good performance. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price. We love happy stories like this one. The company should be really proud of that performance!

Although Supreme Petrochem has shed ₹8.2b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

Check out our latest analysis for Supreme Petrochem

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, Supreme Petrochem achieved compound earnings per share (EPS) growth of 34% per year. This EPS growth is lower than the 56% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on Supreme Petrochem's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Supreme Petrochem's TSR for the last 5 years was 908%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Supreme Petrochem shareholders have received a total shareholder return of 29% over one year. That's including the dividend. However, the TSR over five years, coming in at 59% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. It's always interesting to track share price performance over the longer term. But to understand Supreme Petrochem better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Supreme Petrochem (of which 1 makes us a bit uncomfortable!) you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.