Trent's (NSE:TRENT) five-year total shareholder returns outpace the underlying earnings growth

It might be of some concern to shareholders to see the Trent Limited (NSE:TRENT) share price down 23% in the last month. But that doesn't undermine the fantastic longer term performance (measured over five years). In fact, during that period, the share price climbed 619%. Impressive! So it might be that some shareholders are taking profits after good performance. Only time will tell if there is still too much optimism currently reflected in the share price. It really delights us to see such great share price performance for investors.

Although Trent has shed ₹83b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

View our latest analysis for Trent

Given that Trent only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In the last 5 years Trent saw its revenue grow at 38% per year. That's well above most pre-profit companies. Arguably, this is well and truly reflected in the strong share price gain of 48%(per year) over the same period. Despite the strong run, top performers like Trent have been known to go on winning for decades. So we'd recommend you take a closer look at this one, but keep in mind the market seems optimistic.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Trent is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Trent in this interactive graph of future profit estimates.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for Trent the TSR over the last 5 years was 623%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Trent has rewarded shareholders with a total shareholder return of 37% in the last twelve months. That's including the dividend. However, the TSR over five years, coming in at 49% per year, is even more impressive. 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 Trent that you should be aware of.

Of course Trent may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.