Cogent Communications Holdings (NASDAQ:CCOI) sheds 4.2% this week, as yearly returns fall more in line with earnings growth

The main point of investing for the long term is to make money. Better yet, you'd like to see the share price move up more than the market average. Unfortunately for shareholders, while the Cogent Communications Holdings, Inc. (NASDAQ:CCOI) share price is up 18% in the last five years, that's less than the market return. The last year hasn't been great either, with the stock up just 3.7%.

While the stock has fallen 4.2% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

View our latest analysis for Cogent Communications Holdings

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, Cogent Communications Holdings managed to grow its earnings per share at 0.3% a year. This EPS growth is slower than the share price growth of 3% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 90.83.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Cogent Communications Holdings' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Cogent Communications Holdings' TSR for the last 5 years was 53%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Cogent Communications Holdings shareholders gained a total return of 9.7% during the year. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 9% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. It's always interesting to track share price performance over the longer term. But to understand Cogent Communications Holdings better, we need to consider many other factors. Take risks, for example - Cogent Communications Holdings has 6 warning signs (and 4 which are concerning) we think you should know about.

Cogent Communications Holdings is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been 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.