Great Lakes Dredge & Dock's (NASDAQ:GLDD) three-year total shareholder returns outpace the underlying earnings growth

Low-cost index funds make it easy to achieve average market returns. But if you invest in individual stocks, some are likely to underperform. That's what has happened with the Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) share price. It's up 51% over three years, but that is below the market return. Zooming in, the stock is actually down 4.6% in the last year.

In light of the stock dropping 6.3% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

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.

During three years of share price growth, Great Lakes Dredge & Dock achieved compound earnings per share growth of 15% per year. Notably, the 15% average annual share price gain matches up nicely with the EPS growth rate. This observation indicates that the market's attitude to the business hasn't changed all that much. Rather, the share price has approximately tracked EPS growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Great Lakes Dredge & Dock has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Great Lakes Dredge & Dock will grow revenue in the future.

A Different Perspective

While the broader market gained around 15% in the last year, Great Lakes Dredge & Dock shareholders lost 4.6%. 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 0.6%, 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 2 warning signs for Great Lakes Dredge & Dock (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.