The total return for SHIFT (TSE:3697) investors has risen faster than earnings growth over the last five years

The last three months have been tough on SHIFT Inc. (TSE:3697) shareholders, who have seen the share price decline a rather worrying 32%. But that doesn't undermine the fantastic longer term performance (measured over five years). Indeed, the share price is up a whopping 409% in that time. So we don't think the recent decline in the share price means its story is a sad one. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price.

In light of the stock dropping 5.5% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

Check out our latest analysis for SHIFT

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. 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, SHIFT achieved compound earnings per share (EPS) growth of 66% per year. The EPS growth is more impressive than the yearly share price gain of 38% over the same period. So it seems the market isn't so enthusiastic about the stock these days. Of course, with a P/E ratio of 69.16, the market remains optimistic.

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 SHIFT has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling SHIFT stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

SHIFT provided a TSR of 3.0% over the last twelve months. But that return falls short of the market. On the bright side, the longer term returns (running at about 38% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand SHIFT better, we need to consider many other factors. Take risks, for example - SHIFT has 1 warning sign we think you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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