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MKS Instruments' (NASDAQ:MKSI) five-year total shareholder returns outpace the underlying earnings growth

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It hasn't been the best quarter for MKS Instruments, Inc. (NASDAQ:MKSI) shareholders, since the share price has fallen 14% in that time. But that scarcely detracts from the really solid long term returns generated by the company over five years. It's fair to say most would be happy with 194% the gain in that time. To some, the recent pullback wouldn't be surprising after such a fast rise. Ultimately business performance will determine whether the stock price continues the positive long term trend.

While the stock has fallen 4.7% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

See our latest analysis for MKS Instruments

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.

During five years of share price growth, MKS Instruments achieved compound earnings per share (EPS) growth of 41% per year. This EPS growth is higher than the 24% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days.

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

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

We know that MKS Instruments has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for MKS Instruments the TSR over the last 5 years was 206%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

MKS Instruments provided a TSR of 21% over the last twelve months. But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 25% over five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. Before spending more time on MKS Instruments it might be wise to click here to see if insiders have been buying or selling shares.

Of course MKS Instruments 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 US 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.