The five-year decline in earnings might be taking its toll on VGP (EBR:VGP) shareholders as stock falls 6.1% over the past week

When we invest, we're generally looking for stocks that outperform the market average. And in our experience, buying the right stocks can give your wealth a significant boost. To wit, the VGP share price has climbed 43% in five years, easily topping the market return of 3.4% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 17% in the last year, including dividends.

Although VGP has shed €186m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

See our latest analysis for VGP

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 the five years of share price growth, VGP moved from a loss to profitability. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price.

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

We know that VGP has improved its bottom line lately, but is it going to grow revenue? Check if analysts think VGP will grow revenue in the future.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of VGP, it has a TSR of 69% 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 nice to see that VGP shareholders have received a total shareholder return of 17% over the last year. And that does include the dividend. That's better than the annualised return of 11% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand VGP better, we need to consider many other factors. For example, we've discovered 3 warning signs for VGP (2 are significant!) that you should be aware of before investing here.

We will like VGP better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Belgian 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.