Those who invested in Darden Restaurants (NYSE:DRI) five years ago are up 66%

If you buy and hold a stock for many years, you'd hope to be making a profit. But more than that, you probably want to see it rise more than the market average. Unfortunately for shareholders, while the Darden Restaurants, Inc. (NYSE:DRI) share price is up 44% in the last five years, that's less than the market return. Zooming in, the stock is up just 3.3% in the last year.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

View our latest analysis for Darden Restaurants

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 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).

Over half a decade, Darden Restaurants managed to grow its earnings per share at 8.7% a year. So the EPS growth rate is rather close to the annualized share price gain of 8% per year. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price has approximately tracked EPS growth.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Darden Restaurants the TSR over the last 5 years was 66%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Darden Restaurants shareholders gained a total return of 7.0% during the year. But that return falls short of the market. On the bright side, the longer term returns (running at about 11% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Darden Restaurants you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.