Votum's (WSE:VOT) five-year total shareholder returns outpace the underlying earnings growth

It's been a soft week for Votum S.A. (WSE:VOT) shares, which are down 15%. But over five years returns have been remarkably great. To be precise, the stock price is 382% higher than it was five years ago, a wonderful performance by any measure. 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. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 24% drop, in the last year.

In light of the stock dropping 15% 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.

View our latest analysis for Votum

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, Votum achieved compound earnings per share (EPS) growth of 74% per year. This EPS growth is higher than the 37% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 3.58 also suggests market apprehension.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

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

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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 Votum, it has a TSR of 438% 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

Investors in Votum had a tough year, with a total loss of 20% (including dividends), against a market gain of about 31%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 40%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Votum better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with Votum (including 1 which is significant) .

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.