Capgemini (EPA:CAP) shareholders have earned a 16% CAGR over the last five years

When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. One great example is Capgemini SE (EPA:CAP) which saw its share price drive 114% higher over five years. Also pleasing for shareholders was the 20% gain in the last three months. But this could be related to the strong market, which is up 8.7% in the last three months.

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

View our latest analysis for Capgemini

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 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.

Over half a decade, Capgemini managed to grow its earnings per share at 17% a year. This EPS growth is reasonably close to the 16% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price has approximately tracked EPS growth.

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

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

A Different Perspective

It's good to see that Capgemini has rewarded shareholders with a total shareholder return of 24% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 16% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 1 warning sign for Capgemini you should be aware of.

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 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.