The five-year decline in earnings for Advanced Energy Industries NASDAQ:AEIS) isn't encouraging, but shareholders are still up 61% over that period

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you'd generally like to see the share price rise faster than the market. Unfortunately for shareholders, while the Advanced Energy Industries, Inc. (NASDAQ:AEIS) share price is up 58% in the last five years, that's less than the market return. Meanwhile, the last twelve months saw the share price rise 2.0%.

In light of the stock dropping 3.6% 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 Advanced Energy Industries

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 five years of share price growth, Advanced Energy Industries actually saw its EPS drop 6.8% per year.

This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

The modest 0.4% dividend yield is unlikely to be propping up the share price. On the other hand, Advanced Energy Industries' revenue is growing nicely, at a compound rate of 11% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Advanced Energy Industries is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Advanced Energy Industries' TSR for the last 5 years was 61%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Advanced Energy Industries provided a TSR of 2.4% over the last twelve months. But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 10% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand Advanced Energy Industries better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Advanced Energy Industries you should be aware of.

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.