Those who invested in Inter Cars (WSE:CAR) five years ago are up 141%

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. For instance, the price of Inter Cars S.A. (WSE:CAR) stock is up an impressive 138% over the last five years. The last week saw the share price soften some 2.5%.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

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In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Over half a decade, Inter Cars managed to grow its earnings per share at 24% a year. This EPS growth is higher than the 19% 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 10.77 also suggests market apprehension.

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

This free interactive report on Inter Cars' 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. 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 Inter Cars the TSR over the last 5 years was 141%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Inter Cars shareholders are up 8.6% for the year (even including dividends). But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 19% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. Is Inter Cars cheap compared to other companies? These 3 valuation measures might help you decide.

We will like Inter Cars better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.