Permian Resources (NYSE:PR) shareholders have earned a 43% CAGR over the last five years

Long term investing can be life changing when you buy and hold the truly great businesses. While not every stock performs well, when investors win, they can win big. Don't believe it? Then look at the Permian Resources Corporation (NYSE:PR) share price. It's 444% higher than it was five years ago. And this is just one example of the epic gains achieved by some long term investors. The last week saw the share price soften some 1.9%.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

View our latest analysis for Permian Resources

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. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the last half decade, Permian Resources became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

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

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Permian Resources' earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Permian Resources the TSR over the last 5 years was 491%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Permian Resources shareholders gained a total return of 12% during the year. But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 43% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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 Permian Resources is showing 1 warning sign in our investment analysis , you should know about...

Permian Resources is not the only stock that insiders are buying. For those who like to find lesser know companies 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.

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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.