Investing in S.N.T.G.N. Transgaz (BVB:TGN) five years ago would have delivered you a 334% gain

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, you can make far more than 100% on a really good stock. For instance, the price of S.N.T.G.N. Transgaz S.A. (BVB:TGN) stock is up an impressive 262% over the last five years. It's also good to see the share price up 16% over the last quarter. But this move may well have been assisted by the reasonably buoyant market (up 12% in 90 days).

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

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To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, S.N.T.G.N. Transgaz managed to grow its earnings per share at 23% a year. This EPS growth is lower than the 29% 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. That's not necessarily surprising considering the five-year track record of earnings growth.

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

We know that S.N.T.G.N. Transgaz has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at S.N.T.G.N. Transgaz's financial health with this free report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for S.N.T.G.N. Transgaz the TSR over the last 5 years was 334%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that S.N.T.G.N. Transgaz shareholders have received a total shareholder return of 186% over one year. That's including the dividend. That's better than the annualised return of 34% over half a decade, implying that the company is doing better recently. 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. Take risks, for example - S.N.T.G.N. Transgaz has 3 warning signs (and 2 which make us uncomfortable) we think you should know about.

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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 Romanian 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.