The total return for Usha Martin (NSE:USHAMART) investors has risen faster than earnings growth over the last three years

It might be of some concern to shareholders to see the Usha Martin Limited (NSE:USHAMART) share price down 11% in the last month. But over the last three years the stock has shone bright like a diamond. In fact, the share price has taken off in that time, up 920%. So you might argue that the recent reduction in the share price is unremarkable in light of the longer term performance. The share price action could signify that the business itself is dramatically improved, in that time. We love happy stories like this one. The company should be really proud of that performance!

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

Check out our latest analysis for Usha Martin

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.

During three years of share price growth, Usha Martin achieved compound earnings per share growth of 59% per year. This EPS growth is lower than the 117% 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 three years ago. It's not unusual to see the market 're-rate' a stock, after a few years of growth.

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

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Usha Martin's earnings, revenue and cash flow.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Usha Martin's TSR for the last 3 years was 944%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Usha Martin shareholders have received a total shareholder return of 79% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 56%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Usha Martin better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Usha Martin you should be aware of.

Usha Martin is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.