Premier Investments' (ASX:PMV) five-year earnings growth trails the 21% YoY shareholder returns

It hasn't been the best quarter for Premier Investments Limited (ASX:PMV) shareholders, since the share price has fallen 26% in that time. But the silver lining is the stock is up over five years. However we are not very impressed because the share price is only up 56%, less than the market return of 80%.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

During five years of share price growth, Premier Investments achieved compound earnings per share (EPS) growth of 15% per year. This EPS growth is higher than the 9% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

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

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Premier Investments' total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Premier Investments' TSR of 155% over the last 5 years is better than the share price return.

A Different Perspective

Investors in Premier Investments had a tough year, with a total loss of 5.8%, against a market gain of about 2.4%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 21% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. To that end, you should be aware of the 1 warning sign we've spotted with Premier Investments .

Of course Premier Investments may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.