Earnings growth outpaced the 0.7% CAGR delivered to Orange (EPA:ORA) shareholders over the last five years

The main aim of stock picking is to find the market-beating stocks. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in Orange S.A. (EPA:ORA), since the last five years saw the share price fall 25%.

While the stock has risen 4.7% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

View our latest analysis for Orange

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 unfortunate half decade during which the share price slipped, Orange actually saw its earnings per share (EPS) improve by 6.4% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Alternatively, growth expectations may have been unreasonable in the past.

Due to the lack of correlation between the EPS growth and the falling share price, it's worth taking a look at other metrics to try to understand the share price movement.

The steady dividend doesn't really explain why the share price is down. While it's not completely obvious why the share price is down, a closer look at the company's history might help explain it.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Orange is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think Orange will earn in the future (free analyst consensus estimates)

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 Orange, it has a TSR of 3.8% 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

Orange shareholders are up 1.5% for the year (even including dividends). Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 0.7% per year over five year. This could indicate that the company is winning over new investors, as it pursues its 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. Case in point: We've spotted 2 warning signs for Orange you should be aware of.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.