Investing in Catena (STO:CATE) five years ago would have delivered you a 45% gain

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Better yet, you'd like to see the share price move up more than the market average. But Catena AB (publ) (STO:CATE) has fallen short of that second goal, with a share price rise of 32% over five years, which is below the market return. Over the last twelve months the stock price has risen a very respectable 13%.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for Catena

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Catena's earnings per share are down 2.7% per year, despite strong share price performance over five years.

So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Therefore, it's worth taking a look at other metrics to try to understand the share price movements.

We doubt the modest 1.8% dividend yield is attracting many buyers to the stock. On the other hand, Catena's revenue is growing nicely, at a compound rate of 12% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We know that Catena has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on Catena

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Catena, it has a TSR of 45% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Catena shareholders gained a total return of 15% during the year. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 8% per year over five year. This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand Catena better, we need to consider many other factors. Even so, be aware that Catena is showing 3 warning signs in our investment analysis , and 1 of those can't be ignored...

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 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.