SoftTech Engineers (NSE:SOFTTECH) shareholders notch a 38% CAGR over 5 years, yet earnings have been shrinking

We think all investors should try to buy and hold high quality multi-year winners. And we've seen some truly amazing gains over the years. To wit, the SoftTech Engineers Limited (NSE:SOFTTECH) share price has soared 392% over five years. If that doesn't get you thinking about long term investing, we don't know what will. And in the last week the share price has popped 10%.

Since the stock has added ₹445m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for SoftTech Engineers

While SoftTech Engineers made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last 5 years SoftTech Engineers saw its revenue grow at 8.1% per year. That's a pretty good long term growth rate. However, the share price gain of 38% during the period is considerably stronger. We usually like strong growth stocks but it does seem the market already appreciates this one quite well!

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Take a more thorough look at SoftTech Engineers' financial health with this free report on its balance sheet.

A Different Perspective

It's nice to see that SoftTech Engineers shareholders have received a total shareholder return of 64% over the last year. That gain is better than the annual TSR over five years, which is 38%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand SoftTech Engineers better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with SoftTech Engineers (including 1 which is a bit unpleasant) .

If you are like me, then you will not want to miss this free list of undervalued small caps 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 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.