For many, the main point of investing in the stock market is to achieve spectacular returns.  While the best companies are hard to find, but they can generate massive returns over long periods.  To wit, the TopBuild Corp. (NYSE:BLD) share price has soared 397% over five years.  This just goes to show the value creation that some businesses can achieve.    

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.  

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance.  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.

Over half a decade, TopBuild managed to grow its earnings per share at 36% a year.    This EPS growth is remarkably close to the 38% average annual increase in the share price.   That suggests that the market sentiment around the company hasn't changed much over that time.  Rather, the share price has approximately tracked EPS growth.  

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

NYSE:BLD Earnings Per Share Growth June 4th 2024

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.  Dive deeper into the earnings by checking this interactive graph of TopBuild's earnings, revenue and cash flow.

A Different Perspective

We're pleased to report that TopBuild shareholders have received a total shareholder return of 89% over one year.    That's better than the annualised return of 38% 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.        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.   For instance, we've identified   1 warning sign for TopBuild  that you should be aware of.  

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.