When buying shares of a company, it is worth bearing in mind the possibility that it will fail and you will lose your money. But on a lighter note, a good company can see its stock price soar well over 100%. Long term Ørsted A/S (CPH:ORSTED) shareholders would be well aware of this, since the stock is up 156% in five years. But that’s down 3.4% last week.

Although the stock has fallen 3.4% this week, it is worth focusing on the long term and seeing if historical stock returns have been driven by underlying fundamentals.

See our latest analysis for Ørsted

To quote Buffett, “Ships will circumnavigate the globe, but the Flat Earth Society will prosper. There will continue to be wide gaps between price and value in the market…’ By comparing earnings per share (EPS) and share price changes over time, we can get an idea changes in investors’ attitude towards a company over time.

Over five years of share price growth, Ørsted has achieved compound earnings per share (EPS) growth of 19% per annum. Thus, the EPS growth rate is quite close to the annualized stock price gain of 21% per year. This indicates that investor sentiment towards the company has not changed much. Indeed, it would seem that the share price reacts to BPA.

You can see below how the EPS has evolved over time (find out the exact values ​​by clicking on the image).

We know that Ørsted has recently improved its results, but will it increase its income? This free report showing analyst revenue forecasts should help you determine whether EPS growth can be sustained.

What about dividends?

It is important to consider the total shareholder return, as well as the stock price return, for a given stock. TSR is a calculation of return that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of all discounted capital raisings and spinoffs. It can be said that the TSR gives a more complete picture of the return generated by a stock. It turns out that Ørsted’s TSR for the past 5 years was 179%, which exceeds the stock price return mentioned earlier. And there’s no price guessing that dividend payouts largely explain the divergence!

A different perspective

Ørsted shareholders are down 9.5% on the year (even including dividends), but the market itself is up 8.2%. 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, as they would have gained 23%, every year, over five years. If fundamentals continue to point to sustainable long-term growth, the current sell-off could be an opportunity to consider. It is always interesting to follow the evolution of the share price over the long term. But to better understand Ørsted, we need to consider many other factors. Even so, know that Ørsted shows 3 warning signs in our investment analysis and 2 of them don’t suit us too much…

Sure, you might find a fantastic investment by looking elsewhere. So take a look at this free list of companies that we believe will increase their profits.

Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on DK exchanges.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.