The total return for Thomson Reuters (TSE:TRI) investors has risen faster than earnings growth over the last five years

While Thomson Reuters Corporation (TSE:TRI) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 19% in the last quarter. But at least the stock is up over the last five years. In that time, it is up 63%, which isn't bad, but is below the market return of 96%. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 26% decline over the last twelve months.

Although Thomson Reuters has shed CA$3.6b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

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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.

During five years of share price growth, Thomson Reuters achieved compound earnings per share (EPS) growth of 0.01% per year. This EPS growth is lower than the 10% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

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

This free interactive report on Thomson Reuters' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Thomson Reuters' TSR for the last 5 years was 83%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Thomson Reuters shareholders are down 25% for the year (even including dividends), but the market itself is up 29%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 13%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Take risks, for example - Thomson Reuters has 2 warning signs we think you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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