The total return for Temple & Webster Group (ASX:TPW) investors has risen faster than earnings growth over the last five years

Buying shares in the best businesses can build meaningful wealth for you and your family. While the best companies are hard to find, but they can generate massive returns over long periods. Just think about the savvy investors who held Temple & Webster Group Ltd (ASX:TPW) shares for the last five years, while they gained 403%. And this is just one example of the epic gains achieved by some long term investors. Also pleasing for shareholders was the 22% gain in the last three months.

Although Temple & Webster Group has shed AU$90m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Temple & Webster Group achieved compound earnings per share (EPS) growth of 11% per year. This EPS growth is lower than the 38% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 287.88.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here .

A Different Perspective

We're pleased to report that Temple & Webster Group shareholders have received a total shareholder return of 32% over one year. However, that falls short of the 38% TSR per annum it has made for shareholders, each year, over five years. It's always interesting to track share price performance over the longer term. But to understand Temple & Webster Group better, we need to consider many other factors. For example, we've discovered 1 warning sign for Temple & Webster Group 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.