It hasn't been the best quarter for Builders FirstSource, Inc. (NYSE:BLDR) shareholders, since the share price has fallen 11% in that time. But over five years returns have been remarkably great. To be precise, the stock price is 811% higher than it was five years ago, a wonderful performance by any measure. So we don't think the recent decline in the share price means its story is a sad one. But the real question is whether the business fundamentals can improve over the long term. Anyone who held for that rewarding ride would probably be keen to talk about it.

Since the stock has added US$643m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Builders FirstSource achieved compound earnings per share (EPS) growth of 45% per year. So the EPS growth rate is rather close to the annualized share price gain of 56% per year. This indicates that investor sentiment towards the company has not changed a great deal. 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).

We know that Builders FirstSource has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Builders FirstSource's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Builders FirstSource shareholders are up 14% for the year. But that was short of the market average. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 56% over five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand Builders FirstSource better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with Builders FirstSource .

Of course Builders FirstSource 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.

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