Greenbrier Companies' (NYSE:GBX) five-year total shareholder returns outpace the underlying earnings growth

The Greenbrier Companies, Inc. (NYSE:GBX) shareholders might be concerned after seeing the share price drop 21% in the last month. 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 134% the gain in that time. We think it's more important to dwell on the long term returns than the short term returns. Ultimately business performance will determine whether the stock price continues the positive long term trend.

Although Greenbrier Companies has shed US$75m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

See our latest analysis for Greenbrier Companies

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

Over half a decade, Greenbrier Companies managed to grow its earnings per share at 26% a year. This EPS growth is higher than the 18% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 9.46.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It is of course excellent to see how Greenbrier Companies has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Greenbrier Companies 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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Greenbrier Companies' TSR for the last 5 years was 172%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Greenbrier Companies provided a TSR of 13% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 22% a year, over half a decade) look better. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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 instance, we've identified 3 warning signs for Greenbrier Companies (1 shouldn't be ignored) that you should be aware of.

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.

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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.