The total return for South West Pinnacle Exploration (NSE:SOUTHWEST) investors has risen faster than earnings growth over the last five years

The South West Pinnacle Exploration Limited (NSE:SOUTHWEST) share price has had a bad week, falling 13%. But that doesn't change the fact that the returns over the last half decade have been spectacular. In fact, during that period, the share price climbed 402%. Impressive! Arguably, the recent fall is to be expected after such a strong rise. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price.

Although South West Pinnacle Exploration has shed ₹865m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, South West Pinnacle Exploration achieved compound earnings per share (EPS) growth of 33% per year. So the EPS growth rate is rather close to the annualized share price gain of 38% per year. This indicates that investor sentiment towards the company has not changed a great deal. In fact, the share price seems to largely reflect the EPS growth.

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

This free interactive report on South West Pinnacle Exploration's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for South West Pinnacle Exploration the TSR over the last 5 years was 411%, 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 nice to see that South West Pinnacle Exploration shareholders have received a total shareholder return of 20% over the last year. And that does include the dividend. However, the TSR over five years, coming in at 39% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. It's always interesting to track share price performance over the longer term. But to understand South West Pinnacle Exploration better, we need to consider many other factors. To that end, you should learn about the 4 warning signs we've spotted with South West Pinnacle Exploration (including 2 which don't sit too well with us) .

But note: South West Pinnacle Exploration may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.