NXP Semiconductors' (NASDAQ:NXPI) five-year total shareholder returns outpace the underlying earnings growth

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. One great example is NXP Semiconductors N.V. (NASDAQ:NXPI) which saw its share price drive 148% higher over five years. It's also good to see the share price up 12% over the last quarter. But this could be related to the strong market, which is up 9.0% in the last three months.

In light of the stock dropping 9.8% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

See our latest analysis for NXP Semiconductors

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.

Over half a decade, NXP Semiconductors managed to grow its earnings per share at 10% a year. This EPS growth is lower than the 20% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that NXP Semiconductors has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for NXP Semiconductors the TSR over the last 5 years was 168%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

NXP Semiconductors provided a TSR of 21% over the year (including dividends). That's fairly close to the broader market return. We should note here that the five-year TSR is more impressive, at 22% per year. Although the share price growth has slowed, the longer term story points to a business well worth watching. It's always interesting to track share price performance over the longer term. But to understand NXP Semiconductors better, we need to consider many other factors. For example, we've discovered 3 warning signs for NXP Semiconductors that you should be aware of before investing here.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.

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