While shareholders of Intellect Design Arena (NSE:INTELLECT) are in the black over 5 years, those who bought a week ago aren't so fortunate

Long term investing can be life changing when you buy and hold the truly great businesses. And we've seen some truly amazing gains over the years. To wit, the Intellect Design Arena Limited (NSE:INTELLECT) share price has soared 519% over five years. And this is just one example of the epic gains achieved by some long term investors. Then again, the 9.7% share price decline hasn't been so fun for shareholders. We love happy stories like this one. The company should be really proud of that performance!

While the stock has fallen 3.4% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

See our latest analysis for Intellect Design Arena

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.

During the last half decade, Intellect Design Arena 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.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Intellect Design Arena 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 the Total Shareholder Return (TSR)?

We've already covered Intellect Design Arena's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. We note that Intellect Design Arena's TSR, at 560% is higher than its share price return of 519%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective

Intellect Design Arena provided a TSR of 17% over the last twelve months. But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 46% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. 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 Intellect Design Arena that you should be aware of.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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