Main Street Capital (NYSE:MAIN) shareholders have earned a 22% CAGR over the last five years

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. But more than that, you probably want to see it rise more than the market average. But Main Street Capital Corporation (NYSE:MAIN) has fallen short of that second goal, with a share price rise of 86% over five years, which is below the market return. But if you include dividends then the return is market-beating. Some buyers are laughing, though, with an increase of 33% in the last year.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

See our latest analysis for Main Street Capital

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 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.

Over half a decade, Main Street Capital managed to grow its earnings per share at 23% a year. The EPS growth is more impressive than the yearly share price gain of 13% over the same period. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 10.60 also suggests market apprehension.

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

We know that Main Street Capital has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. In the case of Main Street Capital, it has a TSR of 173% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Main Street Capital shareholders have received a total shareholder return of 44% over the last year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 22% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Main Street Capital better, we need to consider many other factors. Even so, be aware that Main Street Capital is showing 5 warning signs in our investment analysis , and 2 of those are concerning...

Of course Main Street Capital may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.