When you buy a stock, there is always a chance that it will fall 100%. But the good side is that you can earn far more than 100% on a really good stock. For example, the price of Wingstop Inc. (NASDAQ:WING) has risen by an impressive 288% over the past five years. We note that the share price has increased by 1.1% over the past seven days.

So let’s examine whether the company’s long-term performance is consistent with its underlying business history.

Check out our latest analysis for Wingstop

There’s no denying that markets are sometimes efficient, but prices don’t always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).

During the five years of share price growth, Wingstop achieved a compounded earnings per share (EPS) growth of 36% per year. So the EPS growth rate is quite close to the annual share price increase of 31% per year. This suggests that investor sentiment toward the company has not changed much. In fact, it seems like the share price reacts to the EPS.

You can see how earnings per share have changed over time in the image below (click on the chart to see the exact values).

It’s probably worth noting that the CEO earns less than the average at similarly sized companies. But while CEO compensation should always be checked, the really important question is whether the company can grow its earnings in the future. It might be worth taking a look at our free Wingstop earnings, revenue and cash flow report.

What about dividends?

When considering investment returns, the difference must be taken into account between Total return for shareholders (TSR) and Share price return. The TSR takes into account the value of any spin-offs or discounted capital raisings, as well as any dividends, based on the assumption that the dividends are reinvested. It is fair to say that the TSR gives a more complete picture for dividend paying stocks. We note that the TSR for Wingstop over the last 5 years was 327%, which is better than the share price return mentioned above. The dividends paid by the company have thus in total shareholder return.

A different perspective

It’s nice to see that Wingstop shareholders have received a total return of 139% over the last year. This includes the dividend. This return is better than the five-year annual TSR, which is 34%. Therefore, sentiment towards the company seems to have been positive recently. Someone with an optimistic perspective might see the recent improvement in the TSR as an indication that the business itself is getting better over time. I find it very interesting to look at the share price over the long term as an indicator of business performance. But to really gain insights, we need to consider other information as well. A typical example: We have found 3 warning signs for Wingstop You should be aware of this and not ignore any of them.

The story continues

If you would rather check out another company — one with potentially better financials — then don’t miss this free List of companies that have proven their ability to increase their earnings.

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

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This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.