FLSmidth's (CPH:FLS) three-year earnings growth trails the shareholder returns

Buying a low-cost index fund will get you the average market return. But across the board there are plenty of stocks that underperform the market. Unfortunately for shareholders, while the FLSmidth & Co. A/S (CPH:FLS) share price is up 22% in the last three years, that falls short of the market return. In the last year the stock price gained, albeit only 3.3%.

Since the stock has added kr.499m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for FLSmidth

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

FLSmidth was able to grow its EPS at 0.8% per year over three years, sending the share price higher. In comparison, the 7% per year gain in the share price outpaces the EPS growth. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. That's not necessarily surprising considering the three-year track record of earnings growth.

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

It might be well worthwhile taking a look at our free report on FLSmidth'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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for FLSmidth the TSR over the last 3 years was 27%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

FLSmidth provided a TSR of 4.5% over the last twelve months. Unfortunately this falls short of the market return. But at least that's still a gain! Over five years the TSR has been a reduction of 1.2% per year, over five years. It could well be that the business is stabilizing. 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. Take risks, for example - FLSmidth has 2 warning signs we think you should be aware of.

We will like FLSmidth better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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