XPS Pensions Group's (LON:XPS) five-year earnings growth trails the stellar shareholder returns

When you buy a stock there is always a possibility that it could drop 100%. But on a lighter note, a good company can see its share price rise well over 100%. Long term XPS Pensions Group plc (LON:XPS) shareholders would be well aware of this, since the stock is up 180% in five years. Better yet, the share price has risen 5.9% in the last week.

Since the stock has added UK£40m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

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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. 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, XPS Pensions Group achieved compound earnings per share (EPS) growth of 33% per year. The EPS growth is more impressive than the yearly share price gain of 23% over the same period. So it seems the market isn't so enthusiastic about the stock these days.

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

It is of course excellent to see how XPS Pensions Group has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at XPS Pensions Group's financial health with this free report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for XPS Pensions Group the TSR over the last 5 years was 248%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that XPS Pensions Group shareholders have received a total shareholder return of 24% over the last year. That's including the dividend. However, the TSR over five years, coming in at 28% per year, is even more impressive. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with XPS Pensions Group , and understanding them should be part of your investment process.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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