SNT Energy's (KRX:100840) 46% CAGR outpaced the company's earnings growth over the same five-year period

Long term investing can be life changing when you buy and hold the truly great businesses. While the best companies are hard to find, but they can generate massive returns over long periods. Just think about the savvy investors who held SNT Energy Co., Ltd. (KRX:100840) shares for the last five years, while they gained 444%. And this is just one example of the epic gains achieved by some long term investors. It's also good to see the share price up 139% over the last quarter.

Since the stock has added ₩85b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for SNT Energy

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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, SNT Energy achieved compound earnings per share (EPS) growth of 3.4% per year. This EPS growth is slower than the share price growth of 40% per year, over the same period. 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. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 46.55.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

This free interactive report on SNT Energy's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of SNT Energy, it has a TSR of 562% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that SNT Energy shareholders have received a total shareholder return of 362% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 46% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand SNT Energy better, we need to consider many other factors. Even so, be aware that SNT Energy is showing 2 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

Of course SNT Energy 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 South Korean 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.