ODP's (NASDAQ:ODP) five-year total shareholder returns outpace the underlying earnings growth

It hasn't been the best quarter for The ODP Corporation (NASDAQ:ODP) shareholders, since the share price has fallen 18% in that time. But that doesn't change the fact that the returns over the last five years have been very strong. We think most investors would be happy with the 101% return, over that period. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Only time will tell if there is still too much optimism currently reflected in the share price.

While the stock has fallen 15% 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 ODP

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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the five years of share price growth, ODP moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains.

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

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

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between ODP's total shareholder return (TSR) and its 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. Dividends have been really beneficial for ODP shareholders, and that cash payout contributed to why its TSR of 112%, over the last 5 years, is better than the share price return.

A Different Perspective

ODP provided a TSR of 1.4% over the last twelve months. But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 16% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 3 warning signs for ODP that you should be aware of before investing here.

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.

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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.