The total return for Prestige Estates Projects (NSE:PRESTIGE) investors has risen faster than earnings growth over the last five years

Long term investing can be life changing when you buy and hold the truly great businesses. While not every stock performs well, when investors win, they can win big. Don't believe it? Then look at the Prestige Estates Projects Limited (NSE:PRESTIGE) share price. It's 532% higher than it was five years ago. If that doesn't get you thinking about long term investing, we don't know what will. Unfortunately, though, the stock has dropped 6.3% over a week. But note that the broader market is down 3.6% since last week, and this may have impacted Prestige Estates Projects' share price. We love happy stories like this one. The company should be really proud of that performance!

Although Prestige Estates Projects has shed ₹51b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

See our latest analysis for Prestige Estates Projects

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Over half a decade, Prestige Estates Projects managed to grow its earnings per share at 23% a year. This EPS growth is lower than the 45% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth. This optimism is visible in its fairly high P/E ratio of 56.29.

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

We know that Prestige Estates Projects has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Prestige Estates Projects, it has a TSR of 544% 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

We're pleased to report that Prestige Estates Projects shareholders have received a total shareholder return of 162% over one year. And that does include the dividend. That's better than the annualised return of 45% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Prestige Estates Projects better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Prestige Estates Projects (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Indian exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.