The 10% return this week takes Raymond's (NSE:RAYMOND) shareholders three-year gains to 417%

For us, stock picking is in large part the hunt for the truly magnificent stocks. Not every pick can be a winner, but when you pick the right stock, you can win big. One bright shining star stock has been Raymond Limited (NSE:RAYMOND), which is 413% higher than three years ago. And in the last week the share price has popped 10%.

Since the stock has added ₹13b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Raymond

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Raymond became profitable within the last three years. Given the importance of this milestone, it's not overly surprising that the share price has increased strongly.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Raymond has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

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 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 Raymond, it has a TSR of 417% for the last 3 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

Raymond shareholders gained a total return of 3.5% during the year. But that was short of the market average. If we look back over five years, the returns are even better, coming in at 30% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand Raymond better, we need to consider many other factors. To that end, you should learn about the 5 warning signs we've spotted with Raymond (including 3 which are a bit concerning) .

But note: Raymond 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.