Trelleborg (STO:TREL B) delivers shareholders stellar 28% CAGR over 5 years, surging 3.1% in the last week alone

While Trelleborg AB (publ) (STO:TREL B) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 17% in the last quarter. But that doesn't change the fact that shareholders have received really good returns over the last five years. In fact, the share price is 203% higher today. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. The more important question is whether the stock is too cheap or too expensive today.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

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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.

During the last half decade, Trelleborg became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. Indeed, the Trelleborg share price has gained 56% in three years. In the same period, EPS is up 17% per year. That makes EPS very close to the 16% share price growth, each year, over the same period. So one might argue that investor sentiment towards the stock hss not changed much over time. There's a strong correlation between the share price and EPS.

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

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on Trelleborg'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. As it happens, Trelleborg's TSR for the last 5 years was 238%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 2.2% in the twelve months, Trelleborg shareholders did even worse, losing 14% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 28% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Trelleborg better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Trelleborg .

Trelleborg is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Swedish 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.