If you want to compound wealth in the stock market, you can do so by buying an index fund. But in our experience, buying the right stocks can give your wealth a significant boost. For example, the Landstar System, Inc. (NASDAQ:LSTR) share price is up 86% in the last five years, slightly above the market return. Zooming in, the stock is up a respectable 14% in the last year.

Since the stock has added US$340m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Landstar System

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over half a decade, Landstar System managed to grow its earnings per share at 6.6% a year. This EPS growth is lower than the 13% 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. And that's hardly shocking given the track record of growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Landstar System, it has a TSR of 105% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Landstar System provided a TSR of 16% over the last twelve months. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 15% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. It's always interesting to track share price performance over the longer term. But to understand Landstar System better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Landstar System , and understanding them should be part of your investment process.

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 American 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.