The total return for Ipsos (EPA:IPS) investors has risen faster than earnings growth over the last five years

Ipsos SA (EPA:IPS) shareholders have seen the share price descend 11% over the month. But in stark contrast, the returns over the last half decade have impressed. We think most investors would be happy with the 115% return, over that period. Generally speaking the long term returns will give you a better idea of business quality than short periods can. The more important question is whether the stock is too cheap or too expensive today. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 38% decline over the last twelve months.

Since the long term performance has been good but there's been a recent pullback of 5.3%, 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. 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.

During five years of share price growth, Ipsos achieved compound earnings per share (EPS) growth of 15% per year. This EPS growth is reasonably close to the 17% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. In fact, the share price seems to largely reflect the EPS growth.

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

We know that Ipsos has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts .

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Ipsos, it has a TSR of 144% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 5.2% in the twelve months, Ipsos shareholders did even worse, losing 36% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 20%, 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 Ipsos better, we need to consider many other factors. For example, we've discovered 1 warning sign for Ipsos that you should be aware of before investing here.

If you are like me, then you will not want to miss this free list of undervalued small caps 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 French 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.