Centum Electronics (NSE:CENTUM) swells 25% this week, taking five-year gains to 804%

Buying shares in the best businesses can build meaningful wealth for you and your family. And highest quality companies can see their share prices grow by huge amounts. Don't believe it? Then look at the Centum Electronics Limited (NSE:CENTUM) share price. It's 779% higher than it was five years ago. This just goes to show the value creation that some businesses can achieve. Better yet, the share price has risen 25% in the last week. Anyone who held for that rewarding ride would probably be keen to talk about it.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

We've discovered 3 warning signs about Centum Electronics. View them for free.

Centum Electronics wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last 5 years Centum Electronics saw its revenue grow at 6.3% per year. That's a fairly respectable growth rate. Arguably it's more than reflected in the very strong share price gain of 54% a year over a half a decade. It might not be cheap but a (long-term) growth stock like this is usually well worth taking a closer look at.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

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

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 Centum Electronics the TSR over the last 5 years was 804%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Centum Electronics has rewarded shareholders with a total shareholder return of 12% in the last twelve months. That's including the dividend. However, that falls short of the 55% TSR per annum it has made for shareholders, each year, over five years. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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 example, we've discovered 3 warning signs for Centum Electronics (2 are concerning!) that you should be aware of before investing here.

We will like Centum Electronics better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider 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.