NEUCA's (WSE:NEU) five-year earnings growth trails the splendid shareholder returns

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But when you pick a company that is really flourishing, you can make more than 100%. Long term NEUCA S.A. (WSE:NEU) shareholders would be well aware of this, since the stock is up 232% in five years. And in the last month, the share price has gained 11%. But the price may well have benefitted from a buoyant market, since stocks have gained 5.1% in the last thirty days.

Since the stock has added zł276m 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 NEUCA

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.

Over half a decade, NEUCA managed to grow its earnings per share at 2.4% a year. This EPS growth is lower than the 27% average annual increase in the share price. 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.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for NEUCA the TSR over the last 5 years was 264%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

NEUCA shareholders have received returns of 24% over twelve months (even including dividends), which isn't far from the general market return. We should note here that the five-year TSR is more impressive, at 29% per year. Although the share price growth has slowed, the longer term story points to a business well worth watching. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 2 warning signs for NEUCA that you should be aware of before investing here.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.