Tamawood's (ASX:TWD) 207% YoY earnings expansion surpassed the shareholder returns over the past year

The simplest way to invest in stocks is to buy exchange traded funds. But if you pick the right individual stocks, you could make more than that. For example, the Tamawood Limited (ASX:TWD) share price is up 25% in the last 1 year, clearly besting the market return of around 10% (not including dividends). So that should have shareholders smiling. Unfortunately the longer term returns are not so good, with the stock falling 25% in the last three years.

Since the stock has added AU$15m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Tamawood

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).

During the last year Tamawood grew its earnings per share (EPS) by 207%. It's fair to say that the share price gain of 25% did not keep pace with the EPS growth. So it seems like the market has cooled on Tamawood, 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).

Dive deeper into Tamawood's key metrics by checking this interactive graph of Tamawood's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Tamawood the TSR over the last 1 year was 33%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Tamawood shareholders have received a total shareholder return of 33% over one year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 0.3% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Tamawood better, we need to consider many other factors. To that end, you should learn about the 4 warning signs we've spotted with Tamawood (including 2 which shouldn't be ignored) .

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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.