Those who invested in Auto Trader Group (LON:AUTO) five years ago are up 59%

Auto Trader Group plc (LON:AUTO) shareholders might be concerned after seeing the share price drop 11% in the last month. On the bright side the share price is up over the last half decade. In that time, it is up 51%, which isn't bad, but is below the market return of 56%.

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

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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.

Over half a decade, Auto Trader Group managed to grow its earnings per share at 7.8% a year. So the EPS growth rate is rather close to the annualized share price gain of 9% per year. 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.

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

We know that Auto Trader Group has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Auto Trader Group will grow revenue in the future.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, Auto Trader Group's TSR for the last 5 years was 59%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Auto Trader Group shareholders are up 0.6% for the year (even including dividends). But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 10% over five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. Before deciding if you like the current share price, check how Auto Trader Group scores on these 3 valuation metrics.

But note: Auto Trader Group may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.