The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For example, the Nick Scali Limited (ASX:NCK) share price has soared 123% in the last half decade. Most would be very happy with that. Also pleasing for shareholders was the 11% gain in the last three months.

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

View our latest analysis for Nick Scali

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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, Nick Scali achieved compound earnings per share (EPS) growth of 14% per year. This EPS growth is reasonably close to the 17% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. In fact, the share price seems to largely reflect the EPS growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It might be well worthwhile taking a look at our free report on Nick Scali'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. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Nick Scali the TSR over the last 5 years was 205%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Nick Scali shareholders have received a total shareholder return of 51% over the last year. That's including the dividend. That's better than the annualised return of 25% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Nick Scali is showing 1 warning sign in our investment analysis , you should know about...