If You Had Bought Tootsie Roll Industries (NYSE:TR) Shares Five Years Ago You'd Have Made 60%

Stock pickers are generally looking for stocks that will outperform the broader market. Buying under-rated businesses is one path to excess returns. To wit, the Tootsie Roll Industries share price has climbed 60% in five years, easily topping the market return of 46% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 38%, including dividends.

See our latest analysis for Tootsie Roll Industries

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).

Over half a decade, Tootsie Roll Industries managed to grow its earnings per share at 0.1% a year. This EPS growth is slower than the share price growth of 9.8% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth. This optimism is visible in its fairly high P/E ratio of 45.29.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Dive deeper into Tootsie Roll Industries's key metrics by checking this interactive graph of Tootsie Roll Industries's 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Tootsie Roll Industries's TSR for the last 5 years was 68%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Tootsie Roll Industries shareholders have received a total shareholder return of 38% 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 11% 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. Before forming an opinion on Tootsie Roll Industries you might want to consider these 3 valuation metrics.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this freelist of companies that have proven they can grow earnings.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.