Clearwater Paper (NYSE:CLW) shareholders are still up 137% over 5 years despite pulling back 6.3% in the past week

Clearwater Paper Corporation (NYSE:CLW) shareholders have seen the share price descend 13% over the month. But that doesn't change the fact that the returns over the last five years have been very strong. In fact, the share price is 137% higher today. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Of course, that doesn't necessarily mean it's cheap now.

In light of the stock dropping 6.3% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

Check out our latest analysis for Clearwater Paper

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 the five years of share price growth, Clearwater Paper moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. Indeed, the Clearwater Paper share price has gained 61% in three years. During the same period, EPS grew by 8.4% each year. This EPS growth is lower than the 17% average annual increase in the share price over three years. So it's fair to assume the market has a higher opinion of the business than it did three years ago.

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

We know that Clearwater Paper has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Clearwater Paper will grow revenue in the future.

A Different Perspective

It's nice to see that Clearwater Paper shareholders have received a total shareholder return of 48% over the last year. That's better than the annualised return of 19% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. To that end, you should be aware of the 1 warning sign we've spotted with Clearwater Paper .

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

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com