BNP Paribas Bank Polska (WSE:BNP) stock performs better than its underlying earnings growth over last five years

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For example, the BNP Paribas Bank Polska S.A. (WSE:BNP) share price has soared 178% in the last half decade. Most would be very happy with that. It's even up 3.4% in the last week.

Since the stock has added zł518m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

During five years of share price growth, BNP Paribas Bank Polska achieved compound earnings per share (EPS) growth of 36% per year. The EPS growth is more impressive than the yearly share price gain of 23% over the same period. So it seems the market isn't so enthusiastic about the stock these days. The reasonably low P/E ratio of 5.98 also suggests market apprehension.

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

It is of course excellent to see how BNP Paribas Bank Polska has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of BNP Paribas Bank Polska, it has a TSR of 210% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

BNP Paribas Bank Polska shareholders are up 21% 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 25% 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 BNP Paribas Bank Polska better, we need to consider many other factors. Take risks, for example - BNP Paribas Bank Polska has 1 warning sign we think you should be aware of.

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