Wärtsilä Oyj Abp's (HEL:WRT1V) five-year earnings growth trails the massive shareholder returns

When you buy a stock there is always a possibility that it could drop 100%. But on a lighter note, a good company can see its share price rise well over 100%. One great example is Wärtsilä Oyj Abp (HEL:WRT1V) which saw its share price drive 262% higher over five years. On top of that, the share price is up 20% in about a quarter. But this could be related to the strong market, which is up 8.1% in the last three months.

Since it's been a strong week for Wärtsilä Oyj Abp shareholders, let's have a look at trend of the longer term fundamentals.

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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 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 the five years of share price growth, Wärtsilä Oyj Abp moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It is of course excellent to see how Wärtsilä Oyj Abp has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Wärtsilä Oyj Abp's TSR for the last 5 years was 307%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Wärtsilä Oyj Abp shareholders have received a total shareholder return of 75% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 32%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before forming an opinion on Wärtsilä Oyj Abp you might want to consider these 3 valuation metrics.

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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Finnish 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.