Climb Global Solutions' (NASDAQ:CLMB) 49% CAGR outpaced the company's earnings growth over the same five-year period

Long term investing can be life changing when you buy and hold the truly great businesses. And highest quality companies can see their share prices grow by huge amounts. For example, the Climb Global Solutions, Inc. (NASDAQ:CLMB) share price is up a whopping 562% in the last half decade, a handsome return for long term holders. 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 75% over the last quarter. It really delights us to see such great share price performance for investors.

Since the stock has added US$57m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Climb Global Solutions

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

Over half a decade, Climb Global Solutions managed to grow its earnings per share at 16% a year. This EPS growth is lower than the 46% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Climb Global Solutions has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Climb Global Solutions' TSR for the last 5 years was 644%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Climb Global Solutions has rewarded shareholders with a total shareholder return of 141% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 49% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Before spending more time on Climb Global Solutions it might be wise to click here to see if insiders have been buying or selling shares.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.