Optimism for Kohlberg Kravis Roberts (NYSE:KKR) has grown this past week, despite five-year decline in earnings

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%. One great example is Kohlberg Kravis Roberts & Co. L.P. (NYSE:KKR) which saw its share price drive 160% higher over five years. It's even up 7.8% in the last week. But this might be partly because the broader market had a good week last week, gaining 4.7%.

Since the stock has added US$3.7b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Kohlberg Kravis Roberts

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. 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.

During five years of share price growth, Kohlberg Kravis Roberts actually saw its EPS drop 13% per year.

This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

The modest 1.1% dividend yield is unlikely to be propping up the share price. On the other hand, Kohlberg Kravis Roberts' revenue is growing nicely, at a compound rate of 21% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Kohlberg Kravis Roberts is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Kohlberg Kravis Roberts' TSR for the last 5 years was 178%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Kohlberg Kravis Roberts provided a TSR of 14% over the year (including dividends). That's fairly close to the broader market return. It has to be noted that the recent return falls short of the 23% shareholders have gained each year, over half a decade. Although the share price growth has slowed, the longer term story points to a business well worth watching. If you would like to research Kohlberg Kravis Roberts in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.