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Earnings growth outpaced the notable 77% return delivered to Linamar (TSE:LNR) shareholders over the last year

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  • LIMAF

While Linamar Corporation (TSE:LNR) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 13% in the last quarter. But looking back over the last year, the returns have actually been rather pleasing! After all, the share price is up a market-beating 75% in that time.

The past week has proven to be lucrative for Linamar investors, so let's see if fundamentals drove the company's one-year performance.

See our latest analysis for Linamar

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 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.

Linamar was able to grow EPS by 166% in the last twelve months. This EPS growth is significantly higher than the 75% increase in the share price. So it seems like the market has cooled on Linamar, despite the growth. Interesting. This cautious sentiment is reflected in its (fairly low) P/E ratio of 9.35.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
earnings-per-share-growth

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

We're pleased to report that Linamar shareholders have received a total shareholder return of 77% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 7%. 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. It's always interesting to track share price performance over the longer term. But to understand Linamar better, we need to consider many other factors. For example, we've discovered 2 warning signs for Linamar (1 doesn't sit too well with us!) that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.