Supply Network's (ASX:SNL) five-year earnings growth trails the 53% YoY shareholder returns

We think all investors should try to buy and hold high quality multi-year winners. And we've seen some truly amazing gains over the years. To wit, the Supply Network Limited (ASX:SNL) share price has soared 614% over five years. And this is just one example of the epic gains achieved by some long term investors. And in the last week the share price has popped 10%. Anyone who held for that rewarding ride would probably be keen to talk about it.

Since it's been a strong week for Supply Network shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for Supply Network

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 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.

During five years of share price growth, Supply Network achieved compound earnings per share (EPS) growth of 29% per year. This EPS growth is slower than the share price growth of 48% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.

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

We know that Supply Network has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Supply Network stock, you should check out this FREE detailed report on its balance sheet.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Supply Network, it has a TSR of 733% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Supply Network has rewarded shareholders with a total shareholder return of 113% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 53% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Take risks, for example - Supply Network has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

Of course Supply Network 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.