PennyMac Financial Services (NYSE:PFSI) shareholders have earned a 33% CAGR over the last five years

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on a lighter note, a good company can see its share price rise well over 100%. One great example is PennyMac Financial Services, Inc. (NYSE:PFSI) which saw its share price drive 292% higher over five years. The last week saw the share price soften some 2.5%.

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

Check out our latest analysis for PennyMac Financial Services

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).

During five years of share price growth, PennyMac Financial Services achieved compound earnings per share (EPS) growth of 1.9% per year. This EPS growth is slower than the share price growth of 31% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

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

It might be well worthwhile taking a look at our free report on PennyMac Financial Services' earnings, revenue and cash flow.

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. We note that for PennyMac Financial Services the TSR over the last 5 years was 315%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that PennyMac Financial Services shareholders have received a total shareholder return of 39% over one year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 33% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Even so, be aware that PennyMac Financial Services is showing 4 warning signs in our investment analysis , and 1 of those is a bit concerning...

Of course PennyMac Financial Services 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.