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Louisiana-Pacific Corporation (NYSE:LPX) shareholders might be concerned after seeing the share price drop 12% in the last month. But in stark contrast, the returns over the last half decade have impressed. In fact, the share price is 191% higher today. We think it's more important to dwell on the long term returns than the short term returns. Ultimately business performance will determine whether the stock price continues the positive long term trend.
While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.
Check out our latest analysis for Louisiana-Pacific
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.
Louisiana-Pacific's earnings per share are down 2.5% per year, despite strong share price performance over five years.
So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
We doubt the modest 1.4% dividend yield is attracting many buyers to the stock. On the other hand, Louisiana-Pacific's revenue is growing nicely, at a compound rate of 6.7% over the last five years. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Take a more thorough look at Louisiana-Pacific's financial health with this free report on its balance sheet.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Louisiana-Pacific, it has a TSR of 216% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!