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Shutterstock's (NYSE:SSTK) earnings growth rate lags the 35% CAGR delivered to shareholders

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While Shutterstock, Inc. (NYSE:SSTK) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 26% in the last quarter. But in three years the returns have been great. The share price marched upwards over that time, and is now 140% higher than it was. So the recent fall in the share price should be viewed in that context. The fundamental business performance will ultimately dictate whether the top is in, or if this is a stellar buying opportunity.

Since the long term performance has been good but there's been a recent pullback of 5.4%, let's check if the fundamentals match the share price.

Check out our latest analysis for Shutterstock

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Shutterstock was able to grow its EPS at 32% per year over three years, sending the share price higher. We note that the 34% yearly (average) share price gain isn't too far from the EPS growth rate. Coincidence? Probably not. This suggests that sentiment and expectations have not changed drastically. Rather, the share price has approximately tracked EPS growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

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

It is of course excellent to see how Shutterstock has grown profits over the years, but the future is more important for shareholders. This free interactive report on Shutterstock's balance sheet strength is a great place to start, if you want to investigate the stock further.

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 Shutterstock the TSR over the last 3 years was 146%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Shutterstock has rewarded shareholders with a total shareholder return of 35% in the last twelve months. And that does include the dividend. That's better than the annualised return of 15% 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. It's always interesting to track share price performance over the longer term. But to understand Shutterstock better, we need to consider many other factors. Take risks, for example - Shutterstock has 2 warning signs we think you should be aware of.

But note: Shutterstock may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

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

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.