WEG (BVMF:WEGE3) jumps 3.0% this week, though earnings growth is still tracking behind five-year shareholder returns

For many, the main point of investing in the stock market is to achieve spectacular returns. And we've seen some truly amazing gains over the years. Don't believe it? Then look at the WEG S.A. (BVMF:WEGE3) share price. It's 381% higher than it was five years ago. If that doesn't get you thinking about long term investing, we don't know what will. It's also good to see the share price up 36% over the last quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.

The past week has proven to be lucrative for WEG investors, so let's see if fundamentals drove the company's five-year performance.

See our latest analysis for WEG

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over half a decade, WEG managed to grow its earnings per share at 33% a year. This EPS growth is reasonably close to the 37% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.

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

We know that WEG has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of WEG, it has a TSR of 415% 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

We're pleased to report that WEG shareholders have received a total shareholder return of 48% over one year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 39% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Before deciding if you like the current share price, check how WEG scores on these 3 valuation metrics.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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