Brinker International (NYSE:EAT) sheds 3.8% this week, as yearly returns fall more in line with earnings growth

Investing can be hard but the potential fo an individual stock to pay off big time inspires us. Mistakes are inevitable, but a single top stock pick can cover any losses, and so much more. For example, the Brinker International, Inc. (NYSE:EAT) share price is up a whopping 678% in the last three years, a handsome return for long term holders. Also pleasing for shareholders was the 30% gain in the last three months. But this move may well have been assisted by the reasonably buoyant market (up 26% in 90 days). Anyone who held for that rewarding ride would probably be keen to talk about it.

In light of the stock dropping 3.8% 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.

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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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During three years of share price growth, Brinker International achieved compound earnings per share growth of 31% per year. This EPS growth is lower than the 98% average annual increase in the share price. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. That's not necessarily surprising considering the three-year track record of earnings growth.

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

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

A Different Perspective

We're pleased to report that Brinker International shareholders have received a total shareholder return of 147% over one year. That's better than the annualised return of 51% over half a decade, implying that the company is doing better recently. 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 Brinker International better, we need to consider many other factors. Even so, be aware that Brinker International is showing 2 warning signs in our investment analysis , you should know about...

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.