Amkor Technology (NASDAQ:AMKR) jumps 5.8% this week, though earnings growth is still tracking behind five-year shareholder returns

Long term investing can be life changing when you buy and hold the truly great businesses. While not every stock performs well, when investors win, they can win big. To wit, the Amkor Technology, Inc. (NASDAQ:AMKR) share price has soared 393% over five years. And this is just one example of the epic gains achieved by some long term investors. On top of that, the share price is up 12% in about a quarter.

Since the stock has added US$468m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Amkor Technology

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

During five years of share price growth, Amkor Technology achieved compound earnings per share (EPS) growth of 31% per year. This EPS growth is reasonably close to the 38% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. 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?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Amkor Technology the TSR over the last 5 years was 411%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Amkor Technology shareholders have received a total shareholder return of 33% over the last year. And that does include the dividend. However, the TSR over five years, coming in at 39% per year, is even more impressive. It's always interesting to track share price performance over the longer term. But to understand Amkor Technology better, we need to consider many other factors. For instance, we've identified 1 warning sign for Amkor Technology that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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