Blu Label Unlimited Group's (JSE:BLU) five-year earnings growth trails the 29% YoY shareholder returns

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, you can make far more than 100% on a really good stock. Long term Blu Label Unlimited Group Limited (JSE:BLU) shareholders would be well aware of this, since the stock is up 257% in five years. And in the last week the share price has popped 9.1%.

The past week has proven to be lucrative for Blu Label Unlimited Group investors, so let's see if fundamentals drove the company's five-year performance.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Over half a decade, Blu Label Unlimited Group managed to grow its earnings per share at 61% a year. The EPS growth is more impressive than the yearly share price gain of 29% over the same period. So one could conclude that the broader market has become more cautious towards the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 4.78.

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

This free interactive report on Blu Label Unlimited Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's good to see that Blu Label Unlimited Group has rewarded shareholders with a total shareholder return of 157% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 29% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Blu Label Unlimited Group (at least 2 which can't be ignored) , and understanding them should be part of your investment process.

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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on South African 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.