The total return for Lindab International (STO:LIAB) investors has risen faster than earnings growth over the last five years

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. One great example is Lindab International AB (publ) (STO:LIAB) which saw its share price drive 102% higher over five years. Also pleasing for shareholders was the 18% gain in the last three months. But this could be related to the strong market, which is up 7.7% in the last three months.

Although Lindab International has shed kr1.1b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

See our latest analysis for Lindab International

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 five years of share price growth, Lindab International achieved compound earnings per share (EPS) growth of 16% per year. So the EPS growth rate is rather close to the annualized share price gain of 15% per year. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Lindab International's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, Lindab International's TSR for the last 5 years was 125%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Lindab International shareholders have received a total shareholder return of 40% over the last year. That's including the dividend. That gain is better than the annual TSR over five years, which is 18%. 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 1 warning sign for Lindab International that you should be aware of.

Lindab International is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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