Despite shrinking by ₹4.8b in the past week, Arvind Fashions (NSE:ARVINDFASN) shareholders are still up 211% over 5 years

It hasn't been the best quarter for Arvind Fashions Limited (NSE:ARVINDFASN) shareholders, since the share price has fallen 16% in that time. But in stark contrast, the returns over the last half decade have impressed. In fact, the share price is 202% higher today. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Ultimately business performance will determine whether the stock price continues the positive long term trend.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

We've discovered 1 warning sign about Arvind Fashions. View them for free.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the last half decade, Arvind Fashions became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains.

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

We know that Arvind Fashions has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Arvind Fashions' balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Arvind Fashions' TSR for the last 5 years was 211%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Arvind Fashions shareholders are down 15% for the year (even including dividends), but the market itself is up 3.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 25% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Arvind Fashions has 1 warning sign we think you should be aware of.

But note: Arvind Fashions 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.