Investing in Laureate Education (NASDAQ:LAUR) a year ago would have delivered you a 24% gain

There's no doubt that investing in the stock market is a truly brilliant way to build wealth. But if you choose that path, you're going to buy some stocks that fall short of the market. For example, the Laureate Education, Inc. (NASDAQ:LAUR), share price is up over the last year, but its gain of 18% trails the market return. Zooming out, the stock is actually down 2.6% in the last three years.

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 Laureate Education

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 the last year Laureate Education grew its earnings per share (EPS) by 104%. This EPS growth is significantly higher than the 18% increase in the share price. Therefore, it seems the market isn't as excited about Laureate Education as it was before. This could be an opportunity.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It is of course excellent to see how Laureate Education has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Laureate Education's financial health with this free 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Laureate Education the TSR over the last 1 year was 24%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Laureate Education shareholders are up 24% for the year (even including dividends). But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 17% per year over five year. It is possible that returns will improve along with the business fundamentals. 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 1 warning sign for Laureate Education that you should be aware of.

But note: Laureate Education may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.