Tarczynski's (WSE:TAR) earnings growth rate lags the 61% CAGR delivered to shareholders

Tarczynski S.A. (WSE:TAR) shareholders might be concerned after seeing the share price drop 12% in the last week. But that does not change the realty that the stock's performance has been terrific, over five years. In that time, the share price has soared some 832% higher! Arguably, the recent fall is to be expected after such a strong rise. But the real question is whether the business fundamentals can improve over the long term. We love happy stories like this one. The company should be really proud of that performance!

Although Tarczynski has shed zł199m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

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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).

Over half a decade, Tarczynski managed to grow its earnings per share at 40% a year. This EPS growth is lower than the 56% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

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

It might be well worthwhile taking a look at our free report on Tarczynski'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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Tarczynski's TSR for the last 5 years was 976%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Tarczynski shareholders have received a total shareholder return of 160% over the last year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 61% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Tarczynski better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Tarczynski you should know about.

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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.