DXP Enterprises' (NASDAQ:DXPE) 42% CAGR outpaced the company's earnings growth over the same five-year period

It hasn't been the best quarter for DXP Enterprises, Inc. (NASDAQ:DXPE) shareholders, since the share price has fallen 12% in that time. But that does not change the realty that the stock's performance has been terrific, over five years. In fact, during that period, the share price climbed 473%. Impressive! So we don't think the recent decline in the share price means its story is a sad one. The most important thing for savvy investors to consider is whether the underlying business can justify the share price gain.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

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In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over half a decade, DXP Enterprises managed to grow its earnings per share at 20% a year. This EPS growth is slower than the share price growth of 42% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. It might be well worthwhile taking a look at our free report on DXP Enterprises' earnings, revenue and cash flow.

A Different Perspective

We're pleased to report that DXP Enterprises shareholders have received a total shareholder return of 76% over one year. That gain is better than the annual TSR over five years, which is 42%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand DXP Enterprises better, we need to consider many other factors. For instance, we've identified 2 warning signs for DXP Enterprises (1 is potentially serious) that you should be aware of.

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