West Pharmaceutical Services' (NYSE:WST) five-year earnings growth trails the solid shareholder returns

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on a lighter note, a good company can see its share price rise well over 100%. One great example is West Pharmaceutical Services, Inc. (NYSE:WST) which saw its share price drive 262% higher over five years. It's also good to see the share price up 17% over the last quarter. But this move may well have been assisted by the reasonably buoyant market (up 16% in 90 days).

The past week has proven to be lucrative for West Pharmaceutical Services investors, so let's see if fundamentals drove the company's five-year performance.

View our latest analysis for West Pharmaceutical Services

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Over half a decade, West Pharmaceutical Services managed to grow its earnings per share at 29% a year. That makes the EPS growth particularly close to the yearly share price growth of 29%. That suggests that the market sentiment around the company hasn't changed much over that time. In fact, the share price seems to largely reflect the EPS growth.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, West Pharmaceutical Services' TSR for the last 5 years was 267%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that West Pharmaceutical Services shareholders have received a total shareholder return of 42% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 30% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before spending more time on West Pharmaceutical Services it might be wise to click here to see if insiders have been buying or selling shares.

We will like West Pharmaceutical Services better if we see some big insider buys. While we wait, check out this free list of growing companies 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.

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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.