Investors in Sopra Steria Group (EPA:SOP) have seen returns of 26% over the past five years

The main point of investing for the long term is to make money. But more than that, you probably want to see it rise more than the market average. Unfortunately for shareholders, while the Sopra Steria Group SA (EPA:SOP) share price is up 14% in the last five years, that's less than the market return. Unfortunately the share price is down 11% in the last year.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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, Sopra Steria Group managed to grow its earnings per share at 16% a year. The EPS growth is more impressive than the yearly share price gain of 3% over the same period. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 10.27 also suggests market apprehension.

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

It might be well worthwhile taking a look at our free report on Sopra Steria Group's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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, Sopra Steria Group's TSR for the last 5 years was 26%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Investors in Sopra Steria Group had a tough year, with a total loss of 8.4% (including dividends), against a market gain of about 15%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 5% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Sopra Steria Group better, we need to consider many other factors. For instance, we've identified 1 warning sign for Sopra Steria Group that you should be aware of.

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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 French 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.