Buying shares in the best businesses can build meaningful wealth for you and your family. While not every stock performs well, when investors win, they can win big. Don't believe it? Then look at the Dillard's, Inc. (NYSE:DDS) share price. It's 457% higher than it was five years ago. And this is just one example of the epic gains achieved by some long term investors. The last week saw the share price soften some 1.8%.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Dillard's achieved compound earnings per share (EPS) growth of 48% per year. This EPS growth is reasonably close to the 41% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Rather, the share price has approximately tracked EPS growth.

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

It is of course excellent to see how Dillard's has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Dillard's stock, you should check out this FREE detailed report on its balance sheet.

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, Dillard's' TSR for the last 5 years was 562%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Dillard's has rewarded shareholders with a total shareholder return of 32% in the last twelve months. Of course, that includes the dividend. However, the TSR over five years, coming in at 46% per year, is even more impressive. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with Dillard's .

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com