The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But in contrast you can make much more than 100% if the company does well. For example, the Applied Industrial Technologies, Inc. (NYSE:AIT) share price has soared 148% in the last three years. How nice for those who held the stock! On the other hand, the stock price has retraced 3.5% in the last week. However, this might be related to the overall market decline of 2.5% in a week.

In light of the stock dropping 3.5% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.

See our latest analysis for Applied Industrial Technologies

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 three years of share price growth, Applied Industrial Technologies achieved compound earnings per share growth of 143% per year. The average annual share price increase of 35% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Applied Industrial Technologies has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Applied Industrial Technologies 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). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Applied Industrial Technologies, it has a TSR of 158% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Applied Industrial Technologies shareholders have received a total shareholder return of 39% over the last year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 20% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Applied Industrial Technologies 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 Applied Industrial Technologies , and understanding them should be part of your investment process.

Of course Applied Industrial Technologies may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.