J. B. Chemicals & Pharmaceuticals' (NSE:JBCHEPHARM) investors will be pleased with their incredible 712% return over the last five years

We think all investors should try to buy and hold high quality multi-year winners. While the best companies are hard to find, but they can generate massive returns over long periods. For example, the J. B. Chemicals & Pharmaceuticals Limited (NSE:JBCHEPHARM) share price is up a whopping 667% in the last half decade, a handsome return for long term holders. And this is just one example of the epic gains achieved by some long term investors. In the last week shares have slid back 2.4%. Anyone who held for that rewarding ride would probably be keen to talk about it.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for J. B. Chemicals & Pharmaceuticals

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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, J. B. Chemicals & Pharmaceuticals managed to grow its earnings per share at 20% a year. This EPS growth is slower than the share price growth of 50% per year, over the same period. 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. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 46.41.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that J. B. Chemicals & Pharmaceuticals has improved its bottom line lately, but is it going to grow revenue? Check if analysts think J. B. Chemicals & Pharmaceuticals will grow revenue in the future.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of J. B. Chemicals & Pharmaceuticals, it has a TSR of 712% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

J. B. Chemicals & Pharmaceuticals shareholders are up 9.0% for the year (even including dividends). But that return falls short of the market. On the bright side, the longer term returns (running at about 52% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 2 warning signs for J. B. Chemicals & Pharmaceuticals you should be aware of.

But note: J. B. Chemicals & Pharmaceuticals may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.