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

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. Long term Westinghouse Air Brake Technologies Corporation (NYSE:WAB) shareholders would be well aware of this, since the stock is up 154% in five years. On top of that, the share price is up 28% in about a quarter. But this move may well have been assisted by the reasonably buoyant market (up 13% in 90 days).

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

View our latest analysis for Westinghouse Air Brake Technologies

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. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Westinghouse Air Brake Technologies achieved compound earnings per share (EPS) growth of 32% per year. The EPS growth is more impressive than the yearly share price gain of 21% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.

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

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? If you are thinking of buying or selling Westinghouse Air Brake Technologies stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. 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 162%, 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 78% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 21%. Therefore it seems like sentiment around the company has been positive lately. 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. Even so, be aware that Westinghouse Air Brake Technologies is showing 1 warning sign in our investment analysis , you should know about...

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.