Lorne Park Capital Partners (CVE:LPC) stock performs better than its underlying earnings growth over last five years

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. For instance, the price of Lorne Park Capital Partners Inc. (CVE:LPC) stock is up an impressive 173% over the last five years. It's even up 11% in the last week.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

Check out our latest analysis for Lorne Park Capital Partners

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. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Lorne Park Capital Partners achieved compound earnings per share (EPS) growth of 11% per year. This EPS growth is lower than the 22% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 46.02.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Dive deeper into Lorne Park Capital Partners' key metrics by checking this interactive graph of Lorne Park Capital Partners's earnings, revenue and cash flow.

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 Lorne Park Capital Partners, it has a TSR of 196% 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 Lorne Park Capital Partners shareholders have received a total shareholder return of 23% over one year. And that does include the dividend. However, the TSR over five years, coming in at 24% per year, is even more impressive. It's always interesting to track share price performance over the longer term. But to understand Lorne Park Capital Partners better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Lorne Park Capital Partners (of which 1 doesn't sit too well with us!) you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.