It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But in contrast you can make much more than 100% if the company does well. To wit, the National Tyre & Wheel Limited (ASX:NTD) share price has flown 198% in the last three years. Most would be happy with that. Also pleasing for shareholders was the 25% gain in the last three months.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

View our latest analysis for National Tyre & Wheel

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

National Tyre & Wheel was able to grow its EPS at 49% per year over three years, sending the share price higher. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 44% average annual increase in the share price. This suggests that sentiment and expectations have not changed drastically. Rather, the share price has approximately tracked EPS growth.

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 National Tyre & Wheel has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at National Tyre & Wheel's financial health with this free report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for National Tyre & Wheel the TSR over the last 3 years was 275%, 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 National Tyre & Wheel shareholders have gained 74% (in total) over the last year. And yes, that does include the dividend. That gain actually surpasses the 55% TSR it generated (per year) over three years. Given the track record of solid returns over varying time frames, it might be worth putting National Tyre & Wheel on your watchlist. It's always interesting to track share price performance over the longer term. But to understand National Tyre & Wheel better, we need to consider many other factors. Take risks, for example - National Tyre & Wheel has 1 warning sign we think you should be aware of.

Of course National Tyre & Wheel 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 AU 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.