It certainly might concern The Environmental Group Limited (ASX:EGL) shareholders to see the share price down 31% in just 30 days. But that doesn't change the fact that the returns over the last half decade have been spectacular. To be precise, the stock price is 500% higher than it was five years ago, a wonderful performance by any measure. So it might be that some shareholders are taking profits after good performance. But the real question is whether the business fundamentals can improve over the long term.

While the stock has fallen 16% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

View our latest analysis for Environmental Group

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Environmental Group achieved compound earnings per share (EPS) growth of 26% per year. This EPS growth is lower than the 43% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

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

We know that Environmental Group has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Environmental Group will grow revenue in the future.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Environmental Group's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Environmental Group's TSR of 508% for the 5 years exceeded its share price return, because it has paid dividends.

A Different Perspective

Environmental Group shareholders are up 5.9% for the year. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 43% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for Environmental Group you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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