Cleanaway Waste Management (ASX:CWY) shareholders have earned a 8.9% CAGR over the last five years

When we invest, we're generally looking for stocks that outperform the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, the Cleanaway Waste Management Limited (ASX:CWY) share price is up 40% in the last 5 years, clearly besting the market return of around 25% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 11% in the last year, including dividends.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

See our latest analysis for Cleanaway Waste Management

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over half a decade, Cleanaway Waste Management managed to grow its earnings per share at 3.5% a year. This EPS growth is lower than the 7% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

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. Dive deeper into the earnings by checking this interactive graph of Cleanaway Waste Management's earnings, revenue and cash flow.

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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Cleanaway Waste Management the TSR over the last 5 years was 53%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Cleanaway Waste Management shareholders gained a total return of 11% during the year. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 9% over half a decade It is possible that returns will improve along with the business fundamentals. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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.