Investors in Torrent Pharmaceuticals (NSE:TORNTPHARM) have seen solid returns of 184% over the past five years

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, you can make far more than 100% on a really good stock. One great example is Torrent Pharmaceuticals Limited (NSE:TORNTPHARM) which saw its share price drive 167% higher over five years.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

Our free stock report includes 1 warning sign investors should be aware of before investing in Torrent Pharmaceuticals. Read for free now.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Torrent Pharmaceuticals achieved compound earnings per share (EPS) growth of 27% per year. The EPS growth is more impressive than the yearly share price gain of 22% over the same period. So one could conclude that the broader market has become more cautious towards the stock. Of course, with a P/E ratio of 59.17, the market remains optimistic.

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

We know that Torrent Pharmaceuticals has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Torrent Pharmaceuticals, it has a TSR of 184% 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

It's nice to see that Torrent Pharmaceuticals shareholders have received a total shareholder return of 20% over the last year. That's including the dividend. Having said that, the five-year TSR of 23% a year, is even better. 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 1 warning sign for Torrent Pharmaceuticals 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.