Technology One's (ASX:TNE) investors will be pleased with their strong 136% return over the last five years

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. One great example is Technology One Limited (ASX:TNE) which saw its share price drive 121% higher over five years. On top of that, the share price is up 11% in about a quarter. But this could be related to the strong market, which is up 9.5% in the last three months.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

See our latest analysis for Technology One

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. 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, Technology One achieved compound earnings per share (EPS) growth of 36% per year. The EPS growth is more impressive than the yearly share price gain of 17% over the same period. So it seems the market isn't so enthusiastic about the stock these days. Of course, with a P/E ratio of 53.61, the market remains optimistic.

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

We know that Technology One has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 Technology One, it has a TSR of 136% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Technology One shareholders have received a total shareholder return of 16% over the last year. That's including the dividend. Having said that, the five-year TSR of 19% a year, is even better. If you would like to research Technology One in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

Of course Technology One 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.