Summit Materials' (NYSE:SUM) earnings growth rate lags the 14% CAGR delivered to shareholders

It hasn't been the best quarter for Summit Materials, Inc. (NYSE:SUM) shareholders, since the share price has fallen 20% in that time. But the silver lining is the stock is up over five years. In that time, it is up 92%, which isn't bad, but is below the market return of 94%.

While the stock has fallen 3.3% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

View our latest analysis for Summit Materials

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.

Over half a decade, Summit Materials managed to grow its earnings per share at 54% a year. The EPS growth is more impressive than the yearly share price gain of 14% over the same period. So one could conclude that the broader market has become more cautious towards the stock.

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

Dive deeper into Summit Materials' key metrics by checking this interactive graph of Summit Materials's earnings, revenue and cash flow.

A Different Perspective

Summit Materials shareholders are down 3.5% for the year, but the market itself is up 25%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 14%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Summit Materials better, we need to consider many other factors. Even so, be aware that Summit Materials is showing 3 warning signs in our investment analysis , and 1 of those is a bit concerning...

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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.

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