Canadian Tire Corporation (TSE:CTC.A) investors are sitting on a loss of 9.8% if they invested three years ago

While it may not be enough for some shareholders, we think it is good to see the Canadian Tire Corporation, Limited (TSE:CTC.A) share price up 17% in a single quarter. But that doesn't change the fact that the returns over the last three years have been less than pleasing. After all, the share price is down 20% in the last three years, significantly under-performing the market.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for Canadian Tire Corporation

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 the three years that the share price fell, Canadian Tire Corporation's earnings per share (EPS) dropped by 29% each year. In comparison the 7% compound annual share price decline isn't as bad as the EPS drop-off. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term.

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

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Canadian Tire Corporation's earnings, revenue and cash flow.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Canadian Tire Corporation's TSR for the last 3 years was -9.8%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Canadian Tire Corporation shareholders are up 3.1% for the year (even including dividends). But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 7% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Canadian Tire Corporation (of which 1 is a bit concerning!) you should know about.

Canadian Tire Corporation is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.

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.