Despite lower earnings than five years ago, BWG (OB:BWLPG) investors are up 518% since then

BW LPG Limited (OB:BWLPG) shareholders might be concerned after seeing the share price drop 15% in the last quarter. But in stark contrast, the returns over the last half decade have impressed. We think most investors would be happy with the 171% return, over that period. We think it's more important to dwell on the long term returns than the short term returns. Only time will tell if there is still too much optimism currently reflected in the share price.

In light of the stock dropping 4.9% 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.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

BWG's earnings per share are down 14% per year, despite strong share price performance over five years.

This means it's unlikely the market is judging the company based on earnings growth. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

In fact, the dividend has increased over time, which is a positive. Maybe dividend investors have helped support the share price. We'd posit that the revenue growth over the last five years, of 33% per year, would encourage people to invest.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Take a more thorough look at BWG's financial health with this free report on its balance sheet.

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. We note that for BWG the TSR over the last 5 years was 518%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

BWG shareholders are up 0.6% for the year (even including dividends). Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 44% 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. It's always interesting to track share price performance over the longer term. But to understand BWG better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with BWG (including 1 which can't be ignored) .

Of course BWG 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 Norwegian 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.