Optimism for NP3 Fastigheter (STO:NP3) has grown this past week, despite five-year decline in earnings

When you buy a stock there is always a possibility that it could drop 100%. But on a lighter note, a good company can see its share price rise well over 100%. For example, the NP3 Fastigheter AB (publ) (STO:NP3) share price has soared 164% in the last half decade. Most would be very happy with that. And in the last week the share price has popped 3.5%. But this could be related to the buoyant market which is up about 2.1% in a week.

Since the stock has added kr523m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for NP3 Fastigheter

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

During five years of share price growth, NP3 Fastigheter actually saw its EPS drop 13% per year.

This means it's unlikely the market is judging the company based on earnings growth. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

In contrast revenue growth of 15% per year is probably viewed as evidence that NP3 Fastigheter is growing, a real positive. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We know that NP3 Fastigheter 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 NP3 Fastigheter

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, NP3 Fastigheter's TSR for the last 5 years was 202%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that NP3 Fastigheter shareholders have received a total shareholder return of 70% over one year. That's including the dividend. That's better than the annualised return of 25% 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 NP3 Fastigheter better, we need to consider many other factors. To that end, you should learn about the 4 warning signs we've spotted with NP3 Fastigheter (including 1 which is significant) .

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.