Virtus Investment Partners (NYSE:VRTS) stock performs better than its underlying earnings growth over last five years

The simplest way to invest in stocks is to buy exchange traded funds. But the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Virtus Investment Partners, Inc. (NYSE:VRTS) share price is 83% higher than it was five years ago, which is more than the market average. In comparison, the share price is down 8.7% in a year.

The past week has proven to be lucrative for Virtus Investment Partners investors, so let's see if fundamentals drove the company's five-year performance.

Check out our latest analysis for Virtus Investment Partners

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, Virtus Investment Partners achieved compound earnings per share (EPS) growth of 12% per year. This EPS growth is remarkably close to the 13% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. In fact, the share price seems to largely reflect the EPS growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It might be well worthwhile taking a look at our free report on Virtus Investment Partners' earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Virtus Investment Partners the TSR over the last 5 years was 111%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Investors in Virtus Investment Partners had a tough year, with a total loss of 5.5% (including dividends), against a market gain of about 27%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 16% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Before spending more time on Virtus Investment Partners it might be wise to click here to see if insiders have been buying or selling shares.

But note: Virtus Investment Partners 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.

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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.