Investors in Taylor Morrison Home (NYSE:TMHC) have seen stellar returns of 207% over the past five years

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 Taylor Morrison Home Corporation (NYSE:TMHC) shareholders would be well aware of this, since the stock is up 207% in five years. Also pleasing for shareholders was the 23% gain in the last three months. But this could be related to the strong market, which is up 11% in the last three months.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for Taylor Morrison Home

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Taylor Morrison Home achieved compound earnings per share (EPS) growth of 31% per year. This EPS growth is higher than the 25% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 7.65.

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

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

A Different Perspective

It's nice to see that Taylor Morrison Home shareholders have received a total shareholder return of 53% over the last year. That's better than the annualised return of 25% 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. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.