Kainos Group's (LON:KNOS) 37% CAGR outpaced the company's earnings growth over the same five-year period

Buying shares in the best businesses can build meaningful wealth for you and your family. And highest quality companies can see their share prices grow by huge amounts. Just think about the savvy investors who held Kainos Group plc (LON:KNOS) shares for the last five years, while they gained 351%. If that doesn't get you thinking about long term investing, we don't know what will. It's also good to see the share price up 22% over the last quarter.

Since it's been a strong week for Kainos Group shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for Kainos Group

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 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, Kainos Group managed to grow its earnings per share at 27% a year. This EPS growth is slower than the share price growth of 35% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 51.96.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. It might be well worthwhile taking a look at our free report on Kainos Group's earnings, revenue and cash flow.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Kainos Group the TSR over the last 5 years was 387%, 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

Kainos Group shareholders are up 0.8% for the year (even including dividends). But that was short of the market average. On the bright side, the longer term returns (running at about 37% 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. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Kainos Group by clicking this link.

Kainos Group is not the only stock that insiders are buying. 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 GB 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.