CRA International (NASDAQ:CRAI) sheds 7.6% this week, as yearly returns fall more in line with earnings growth

Long term investing can be life changing when you buy and hold the truly great businesses. And we've seen some truly amazing gains over the years. Don't believe it? Then look at the CRA International, Inc. (NASDAQ:CRAI) share price. It's 338% higher than it was five years ago. If that doesn't get you thinking about long term investing, we don't know what will. Also pleasing for shareholders was the 11% gain in the last three months. But this move may well have been assisted by the reasonably buoyant market (up 19% in 90 days).

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

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In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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, CRA International managed to grow its earnings per share at 21% a year. This EPS growth is lower than the 34% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that CRA International has improved its bottom line lately, but is it going to grow revenue? Check if analysts think CRA International will grow revenue in the future.

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 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. In the case of CRA International, it has a TSR of 369% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

CRA International shareholders are up 2.0% for the year (even including dividends). Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 36% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 1 warning sign for CRA International that you should be aware of.

We will like CRA International 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.