Recent 5.4% pullback isn't enough to hurt long-term SigmaRoc (LON:SRC) shareholders, they're still up 86% over 5 years

Stock pickers are generally looking for stocks that will outperform the broader market. Buying under-rated businesses is one path to excess returns. For example, the SigmaRoc plc (LON:SRC) share price is up 86% in the last 5 years, clearly besting the market return of around 26% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 11%.

Although SigmaRoc has shed UK£48m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

See our latest analysis for SigmaRoc

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, SigmaRoc achieved compound earnings per share (EPS) growth of 7.8% per year. We do note that extraordinary items have impacted its earnings history. This EPS growth is lower than the 13% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

SigmaRoc shareholders are up 11% for the year. But that return falls short of the market. On the bright side, the longer term returns (running at about 13% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. 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. To that end, you should be aware of the 1 warning sign we've spotted with SigmaRoc .

Of course SigmaRoc may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.