Westinghouse Air Brake Technologies' (NYSE:WAB) five-year earnings growth trails the 20% YoY shareholder returns

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. One great example is Westinghouse Air Brake Technologies Corporation (NYSE:WAB) which saw its share price drive 138% higher over five years. It's also good to see the share price up 14% over the last quarter. But this could be related to the strong market, which is up 9.2% in the last three months.

Since it's been a strong week for Westinghouse Air Brake Technologies shareholders, let's have a look at trend of the longer term fundamentals.

Check out our latest analysis for Westinghouse Air Brake Technologies

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Westinghouse Air Brake Technologies achieved compound earnings per share (EPS) growth of 21% per year. This EPS growth is reasonably close to the 19% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. 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).

We know that Westinghouse Air Brake Technologies has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Westinghouse Air Brake Technologies' financial health with this free report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Westinghouse Air Brake Technologies the TSR over the last 5 years was 146%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Westinghouse Air Brake Technologies shareholders have received a total shareholder return of 50% over one year. And that does include the dividend. That's better than the annualised return of 20% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Take risks, for example - Westinghouse Air Brake Technologies has 1 warning sign we think you should be aware of.

We will like Westinghouse Air Brake Technologies better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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