National Tyre & Wheel's (ASX:NTD) earnings growth rate lags the 22% CAGR delivered to shareholders

Some National Tyre & Wheel Limited (ASX:NTD) shareholders are probably rather concerned to see the share price fall 39% over the last three months. But that doesn't change the fact that the returns over the last three years have been pleasing. In fact, the company's share price bested the return of its market index in that time, posting a gain of 56%.

Since the long term performance has been good but there's been a recent pullback of 13%, let's check if the fundamentals match the share price.

Check out our latest analysis for National Tyre & Wheel

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

National Tyre & Wheel was able to grow its EPS at 4.3% per year over three years, sending the share price higher. In comparison, the 16% per year gain in the share price outpaces the EPS growth. So it's fair to assume the market has a higher opinion of the business than it did three years ago. It is quite common to see investors become enamoured with a business, after a few years of solid progress.

The graphic below depicts how EPS has changed over time (unveil 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. This free interactive report on National Tyre & Wheel's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. We note that for National Tyre & Wheel the TSR over the last 3 years was 81%, 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

The last twelve months weren't great for National Tyre & Wheel shares, which performed worse than the market, costing holders 40%, including dividends. The market shed around 3.3%, no doubt weighing on the stock price. Fortunately the longer term story is brighter, with total returns averaging about 22% per year over three years. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that National Tyre & Wheel is showing 5 warning signs in our investment analysis , and 1 of those is a bit concerning...

National Tyre & Wheel 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 AU 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.