Badger Infrastructure Solutions' (TSE:BDGI) five-year total shareholder returns outpace the underlying earnings growth

If you buy and hold a stock for many years, you'd hope to be making a profit. Furthermore, you'd generally like to see the share price rise faster than the market. But Badger Infrastructure Solutions Ltd. (TSE:BDGI) has fallen short of that second goal, with a share price rise of 47% over five years, which is below the market return. Unfortunately the share price is down 25% in the last year.

Since the long term performance has been good but there's been a recent pullback of 6.0%, let's check if the fundamentals match the share price.

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There is no denying that markets are sometimes efficient, but prices do not always reflect 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, Badger Infrastructure Solutions moved from a loss to profitability. That would generally be considered a positive, so we'd hope to see the share price to rise.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on Badger Infrastructure Solutions' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. As it happens, Badger Infrastructure Solutions' TSR for the last 5 years was 62%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Investors in Badger Infrastructure Solutions had a tough year, with a total loss of 24% (including dividends), against a market gain of about 12%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 10%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Badger Infrastructure Solutions better, we need to consider many other factors. Take risks, for example - Badger Infrastructure Solutions has 2 warning signs we think you should be aware of.

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