The 7.0% return this week takes Black Box's (NSE:BBOX) shareholders five-year gains to 754%

We think all investors should try to buy and hold high quality multi-year winners. And highest quality companies can see their share prices grow by huge amounts. To wit, the Black Box Limited (NSE:BBOX) share price has soared 754% over five years. And this is just one example of the epic gains achieved by some long term investors. On top of that, the share price is up 41% in about a quarter. It really delights us to see such great share price performance for investors.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

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To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the last half decade, Black Box became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. Indeed, the Black Box share price has gained 257% in three years. During the same period, EPS grew by 39% each year. This EPS growth is lower than the 53% average annual increase in the share price over three years. So one can reasonably conclude the market is more enthusiastic about the stock than it was three years ago.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It is of course excellent to see how Black Box has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Black Box's financial health with this free report on its balance sheet.

A Different Perspective

It's good to see that Black Box has rewarded shareholders with a total shareholder return of 36% in the last twelve months. Of course, that includes the dividend. Having said that, the five-year TSR of 54% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Black Box (at least 2 which shouldn't be ignored) , and understanding them should be part of your investment process.

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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.