The one-year decline in earnings for Qualitas ASX:QAL) isn't encouraging, but shareholders are still up 15% over that period

The Qualitas Limited (ASX:QAL) share price has had a bad week, falling 14%. While that might be a setback, it doesn't negate the nice returns received over the last twelve months. Looking at the full year, the company has easily bested an index fund by gaining 12%.

Although Qualitas has shed AU$117m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

View our latest analysis for Qualitas

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over the last twelve months, Qualitas actually shrank its EPS by 99%.

This means it's unlikely the market is judging the company based on earnings growth. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.

We doubt the modest 1.7% dividend yield is doing much to support the share price. Revenue was pretty stable on last year, so deeper research might be needed to explain the share price rise.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Qualitas the TSR over the last 1 year was 15%, 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

Qualitas boasts a total shareholder return of 15% for the last year (that includes the dividends) . Unfortunately the share price is down 4.0% over the last quarter. It may simply be that the share price got ahead of itself, although there may have been fundamental developments that are weighing on it. It's always interesting to track share price performance over the longer term. But to understand Qualitas better, we need to consider many other factors. For example, we've discovered 1 warning sign for Qualitas that you should be aware of before investing here.

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.