The 12% return this week takes Shree Rama Newsprint's (NSE:RAMANEWS) shareholders five-year gains to 131%

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But when you pick a company that is really flourishing, you can make more than 100%. Long term Shree Rama Newsprint Limited (NSE:RAMANEWS) shareholders would be well aware of this, since the stock is up 131% in five years. It's also good to see the share price up 15% over the last quarter.

Since the stock has added ₹543m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

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Shree Rama Newsprint 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. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last 5 years Shree Rama Newsprint saw its revenue shrink by 46% per year. Given that scenario, we wouldn't have expected the share price to rise 18% per year, but that's what it did. It's a good reminder that expectations about the future, not the past history, always impact share prices. Still, we are a bit cautious in this kind of situation.

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

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

We're pleased to report that Shree Rama Newsprint shareholders have received a total shareholder return of 100% over one year. That's better than the annualised return of 18% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Take risks, for example - Shree Rama Newsprint has 4 warning signs (and 2 which shouldn't be ignored) we think you should know about.

Of course Shree Rama Newsprint 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.

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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.