RPG Life Sciences' (NSE:RPGLIFE) 46% CAGR outpaced the company's earnings growth over the same five-year period

For many, the main point of investing in the stock market is to achieve spectacular returns. While the best companies are hard to find, but they can generate massive returns over long periods. Don't believe it? Then look at the RPG Life Sciences Limited (NSE:RPGLIFE) share price. It's 513% higher than it was five years ago. If that doesn't get you thinking about long term investing, we don't know what will. It's also good to see the share price up 12% over the last quarter. But this move may well have been assisted by the reasonably buoyant market (up 14% in 90 days). We love happy stories like this one. The company should be really proud of that performance!

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

Check out our latest analysis for RPG Life Sciences

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 five years of share price growth, RPG Life Sciences achieved compound earnings per share (EPS) growth of 52% per year. So the EPS growth rate is rather close to the annualized share price gain of 44% per year. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price has approximately tracked EPS growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It might be well worthwhile taking a look at our free report on RPG Life Sciences' earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, RPG Life Sciences' TSR for the last 5 years was 565%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that RPG Life Sciences shareholders have received a total shareholder return of 72% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 46% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. For instance, we've identified 2 warning signs for RPG Life Sciences (1 shouldn't be ignored) that you should be aware of.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.