Franklin Electric (NASDAQ:FELE) shareholders have earned a 14% CAGR over the last five years

The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share price rise faster than the market. But Franklin Electric Co., Inc. (NASDAQ:FELE) has fallen short of that second goal, with a share price rise of 85% over five years, which is below the market return. Some buyers are laughing, though, with an increase of 20% in the last year.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

See our latest analysis for Franklin Electric

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

Over half a decade, Franklin Electric managed to grow its earnings per share at 15% a year. This EPS growth is reasonably close to the 13% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. In fact, the share price seems to largely reflect the EPS growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Dive deeper into Franklin Electric's key metrics by checking this interactive graph of Franklin Electric's earnings, revenue and cash flow.

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 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. We note that for Franklin Electric the TSR over the last 5 years was 94%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Franklin Electric shareholders are up 22% for the year (even including dividends). But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 14% over half a decade It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand Franklin Electric better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Franklin Electric you should know about.

But note: Franklin Electric may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.