S.N.T.G.N. Transgaz (BVB:TGN) jumps 4.8% this week, though earnings growth is still tracking behind three-year shareholder returns

It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But in contrast you can make much more than 100% if the company does well. For instance the S.N.T.G.N. Transgaz S.A. (BVB:TGN) share price is 251% higher than it was three years ago. Most would be happy with that. It's also good to see the share price up 50% over the last quarter.

The past week has proven to be lucrative for S.N.T.G.N. Transgaz investors, so let's see if fundamentals drove the company's three-year performance.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

S.N.T.G.N. Transgaz was able to grow its EPS at 48% per year over three years, sending the share price higher. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 52% average annual increase in the share price. This observation indicates that the market's attitude to the business hasn't changed all that much. Quite to the contrary, the share price has arguably reflected the EPS growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It is of course excellent to see how S.N.T.G.N. Transgaz 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 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of S.N.T.G.N. Transgaz, it has a TSR of 283% for the last 3 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

It's nice to see that S.N.T.G.N. Transgaz shareholders have received a total shareholder return of 130% over the last year. And that does include the dividend. That's better than the annualised return of 28% over half a decade, implying that the company is doing better recently. 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 S.N.T.G.N. Transgaz better, we need to consider many other factors. Take risks, for example - S.N.T.G.N. Transgaz has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

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 Romanian 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.