Despite shrinking by US$67m in the past week, Bel Fuse (NASDAQ:BELF.A) shareholders are still up 964% over 5 years

For many, the main point of investing in the stock market is to achieve spectacular returns. And highest quality companies can see their share prices grow by huge amounts. To wit, the Bel Fuse Inc. (NASDAQ:BELF.A) share price has soared 918% over five years. And this is just one example of the epic gains achieved by some long term investors. It's also good to see the share price up 35% over the last quarter. It really delights us to see such great share price performance for investors.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, Bel Fuse 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. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. Indeed, the Bel Fuse share price has gained 320% in three years. Meanwhile, EPS is up 12% per year. Notably, the EPS growth has been slower than the annualised share price gain of 61% over three years. So one can reasonably conclude the market is more enthusiastic about the stock than it was three years ago.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. 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 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, Bel Fuse's TSR for the last 5 years was 964%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Bel Fuse's TSR for the year was broadly in line with the market average, at 19%. It has to be noted that the recent return falls short of the 60% shareholders have gained each year, over half a decade. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes Bel Fuse a stock worth watching. Before forming an opinion on Bel Fuse you might want to consider these 3 valuation metrics.

Of course Bel Fuse may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.