Sterling Infrastructure's (NASDAQ:STRL) earnings growth rate lags the 59% CAGR delivered to shareholders

We think all investors should try to buy and hold high quality multi-year winners. And highest quality companies can see their share prices grow by huge amounts. Just think about the savvy investors who held Sterling Infrastructure, Inc. (NASDAQ:STRL) shares for the last five years, while they gained 919%. This just goes to show the value creation that some businesses can achieve. Also pleasing for shareholders was the 25% gain in the last three months. Anyone who held for that rewarding ride would probably be keen to talk about it.

Since the long term performance has been good but there's been a recent pullback of 3.3%, let's check if the fundamentals match the share price.

Check out our latest analysis for Sterling Infrastructure

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 five years of share price growth, Sterling Infrastructure achieved compound earnings per share (EPS) growth of 42% per year. This EPS growth is lower than the 59% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It is of course excellent to see how Sterling Infrastructure has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Sterling Infrastructure's financial health with this free report on its balance sheet.

A Different Perspective

It's nice to see that Sterling Infrastructure shareholders have received a total shareholder return of 95% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 59% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Sterling Infrastructure better, we need to consider many other factors. For instance, we've identified 1 warning sign for Sterling Infrastructure that you should be aware of.

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 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.