Recent 11% pullback isn't enough to hurt long-term ALM Equity (STO:ALM) shareholders, they're still up 73% over 5 years

The last three months have been tough on ALM Equity AB (publ) (STO:ALM) shareholders, who have seen the share price decline a rather worrying 36%. On the other hand the returns over the last half decade have not been bad. After all, the stock has performed better than the market (57%) in that time, and is up 66%. While the returns over the last 5 years have been good, we do feel sorry for those shareholders who haven't held shares that long, because the share price is down 51% in the last three years.

Although ALM Equity has shed kr440m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

View our latest analysis for ALM Equity

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, ALM Equity managed to grow its earnings per share at 14% a year. The EPS growth is more impressive than the yearly share price gain of 11% over the same period. So one could conclude that the broader market has become more cautious towards the stock.

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

It might be well worthwhile taking a look at our free report on ALM Equity's earnings, revenue and cash flow.

What About The Total Shareholder Return (TSR)?

We've already covered ALM Equity's share price action, but we should also mention its 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. Its history of dividend payouts mean that ALM Equity's TSR of 73% over the last 5 years is better than the share price return.

A Different Perspective

While the broader market gained around 6.9% in the last year, ALM Equity shareholders lost 43%. 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 12%, 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 ALM Equity better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with ALM Equity (including 1 which is potentially serious) .

If you are like me, then you will not want to miss this free list of growing companies that insiders are 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.