There's no doubt that investing in the stock market is a truly brilliant way to build wealth. But if when you choose to buy stocks, some of them will be below average performers. Unfortunately for shareholders, while the The Gorman-Rupp Company (NYSE:GRC) share price is up 27% in the last year, that falls short of the market return. Zooming out, the stock is actually down 12% in the last three years.

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.

Check out our latest analysis for Gorman-Rupp

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Gorman-Rupp was able to grow EPS by 34% in the last twelve months. This EPS growth is significantly higher than the 27% increase in the share price. Therefore, it seems the market isn't as excited about Gorman-Rupp as it was before. This could be an opportunity.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on Gorman-Rupp's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, Gorman-Rupp's TSR for the last 1 year was 29%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Gorman-Rupp shareholders gained a total return of 29% during the year. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 1.9% over half a decade This suggests the company might be improving over time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 1 warning sign for Gorman-Rupp that you should be aware of.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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