GUD Holdings' (ASX:GUD) underlying earnings growth outpaced the notable return generated for shareholders over the past year

It hasn't been the best quarter for GUD Holdings Limited (ASX:GUD) shareholders, since the share price has fallen 12% in that time. While that might be a setback, it doesn't negate the nice returns received over the last twelve months. In that time we've seen the stock easily surpass the market return, with a gain of 29%.

In light of the stock dropping 5.3% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive one-year return.

View our latest analysis for GUD Holdings

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 the last year GUD Holdings grew its earnings per share (EPS) by 198%. This EPS growth is significantly higher than the 29% increase in the share price. So it seems like the market has cooled on GUD Holdings, despite the growth. Interesting.

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

We know that GUD Holdings has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, GUD Holdings' TSR for the last 1 year was 34%, 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 GUD Holdings shareholders have received a total shareholder return of 34% over the last year. And that does include the dividend. That's better than the annualised return of 1.5% 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. 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 2 warning signs for GUD Holdings that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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