Despite shrinking by US$46m in the past week, LSI Industries (NASDAQ:LYTS) shareholders are still up 303% over 5 years

It's been a soft week for LSI Industries Inc. (NASDAQ:LYTS) shares, which are down 10%. But that doesn't change the fact that the returns over the last five years have been very strong. It's fair to say most would be happy with 257% the gain in that time. We think it's more important to dwell on the long term returns than the short term returns. Only time will tell if there is still too much optimism currently reflected in the share price.

Although LSI Industries has shed US$46m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

View our latest analysis for LSI Industries

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 the last half decade, LSI Industries became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. Indeed, the LSI Industries share price has gained 101% in three years. In the same period, EPS is up 54% per year. This EPS growth is higher than the 26% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat.

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

It is of course excellent to see how LSI Industries has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling LSI Industries stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of LSI Industries, it has a TSR of 303% 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

We're pleased to report that LSI Industries shareholders have received a total shareholder return of 21% over one year. That's including the dividend. However, that falls short of the 32% TSR per annum it has made for shareholders, each year, over five years. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. It's always interesting to track share price performance over the longer term. But to understand LSI Industries better, we need to consider many other factors. Take risks, for example - LSI Industries has 1 warning sign we think you should be aware of.

Of course LSI Industries may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.

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