Summit Materials (NYSE:SUM) jumps 7.4% this week, though earnings growth is still tracking behind five-year shareholder returns

If you buy and hold a stock for many years, you'd hope to be making a profit. Furthermore, you'd generally like to see the share price rise faster than the market. But Summit Materials, Inc. (NYSE:SUM) has fallen short of that second goal, with a share price rise of 74% over five years, which is below the market return. Looking at the last year alone, the stock is up 18%.

Since it's been a strong week for Summit Materials shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for Summit Materials

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 five years of share price growth, Summit Materials achieved compound earnings per share (EPS) growth of 55% per year. This EPS growth is higher than the 12% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

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

A Different Perspective

Summit Materials shareholders are up 18% for the year. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 12% per year over five year. This suggests the company might be improving over time. 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. Case in point: We've spotted 3 warning signs for Summit Materials you should be aware of, and 1 of them doesn't sit too well with us.

We will like Summit Materials better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.