Kadant Inc. (NYSE:KAI) shareholders might be concerned after seeing the share price drop 15% in the last month. But that does not change the realty that the stock's performance has been terrific, over five years. Indeed, the share price is up a whopping 372% in that time. 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 4.9% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

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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...' 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.

Over half a decade, Kadant managed to grow its earnings per share at 15% a year. This EPS growth is slower than the share price growth of 36% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Kadant's TSR for the last 5 years was 386%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Kadant shareholders are up 3.1% for the year (even including dividends). But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 37% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand Kadant better, we need to consider many other factors. Even so, be aware that Kadant is showing 1 warning sign in our investment analysis , you should know about...

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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.