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Investing in Graphic Packaging Holding (NYSE:GPK) five years ago would have delivered you a 111% gain

If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can do a lot better than that by buying good quality businesses for attractive prices. For example, the Graphic Packaging Holding Company (NYSE:GPK) share price is up 93% in the last five years, slightly above the market return. Also positive is the 15% share price rise over the last year.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

View our latest analysis for Graphic Packaging Holding

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 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.

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Over half a decade, Graphic Packaging Holding managed to grow its earnings per share at 22% a year. The EPS growth is more impressive than the yearly share price gain of 14% over the same period. So one could conclude that the broader market has become more cautious towards the stock.

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

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

It is of course excellent to see how Graphic Packaging Holding has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Graphic Packaging Holding stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. In the case of Graphic Packaging Holding, it has a TSR of 111% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Graphic Packaging Holding shareholders are up 16% for the year (even including dividends). Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 16% over half a decade It is possible that returns will improve along with the business fundamentals. 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. To that end, you should be aware of the 1 warning sign we've spotted with Graphic Packaging Holding .

Of course Graphic Packaging Holding 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 American 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.

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