Marathon Nextgen Realty (NSE:MARATHON) stock performs better than its underlying earnings growth over last five years

We think all investors should try to buy and hold high quality multi-year winners. While not every stock performs well, when investors win, they can win big. For example, the Marathon Nextgen Realty Limited (NSE:MARATHON) share price is up a whopping 639% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. And in the last week the share price has popped 12%. It really delights us to see such great share price performance for investors.

The past week has proven to be lucrative for Marathon Nextgen Realty investors, so let's see if fundamentals drove the company's five-year performance.

View our latest analysis for Marathon Nextgen Realty

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, Marathon Nextgen Realty achieved compound earnings per share (EPS) growth of 40% per year. So the EPS growth rate is rather close to the annualized share price gain of 49% 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.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. We note that for Marathon Nextgen Realty the TSR over the last 5 years was 643%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Marathon Nextgen Realty has rewarded shareholders with a total shareholder return of 59% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 49% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Take risks, for example - Marathon Nextgen Realty has 1 warning sign we think you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.