When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. For example, long term The Weir Group PLC (LON:WEIR) shareholders have enjoyed a 41% share price rise over the last half decade, well in excess of the market return of around 5.6% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 28% in the last year, including dividends.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for Weir Group

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 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 five years of share price growth, Weir Group achieved compound earnings per share (EPS) growth of 33% per year. This EPS growth is higher than the 7% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days.

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

Dive deeper into Weir Group's key metrics by checking this interactive graph of Weir Group's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Weir Group's TSR for the last 5 years was 51%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Weir Group has rewarded shareholders with a total shareholder return of 28% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 9%. 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. If you would like to research Weir Group in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.