Descartes Systems Group's (TSE:DSG) five-year earnings growth trails the 19% YoY shareholder returns

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, you can make far more than 100% on a really good stock. For instance, the price of The Descartes Systems Group Inc. (TSE:DSG) stock is up an impressive 139% over the last five years. In the last week the share price is up 3.1%.

Since the stock has added CA$330m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Descartes Systems Group

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 five years of share price growth, Descartes Systems Group achieved compound earnings per share (EPS) growth of 27% per year. The EPS growth is more impressive than the yearly share price gain of 19% over the same period. So one could conclude that the broader market has become more cautious towards the stock. Of course, with a P/E ratio of 69.14, the market remains optimistic.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It is of course excellent to see how Descartes Systems Group has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Descartes Systems Group stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

We're pleased to report that Descartes Systems Group shareholders have received a total shareholder return of 20% over one year. That gain is better than the annual TSR over five years, which is 19%. Therefore it seems like sentiment around the company has been positive lately. 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 spending more time on Descartes Systems Group it might be wise to click here to see if insiders have been buying or selling shares.

If you are like me, then you will not want to miss this free list of growing companies that insiders are 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.