The worst outcome after buying shares of a company (assuming no leverage effect) would be if you lost all your invested money. But there are also positive aspects: With a really good stock, you can earn far more than 100%. For example, the Caterpillar Inc. (NYSE:CAT) The stock price is up 191% over the last five years. Most people would be very happy about that. Even better, the stock price is up 5.4% over the last week. This could be related to the latest financial results that were released less than a week ago – you can read the most recent data in our company report.

With a solid seven-day performance in mind, let’s examine what role the company’s fundamentals have played in driving long-term shareholder returns.

Check out our latest analysis for Caterpillar

There’s no denying that markets are sometimes efficient, but prices don’t always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).

Over half a decade, Caterpillar managed to grow its earnings per share by 16% per year. This EPS growth is slower than the share price growth of 24% per year over the same period, suggesting that market participants have a higher opinion of the company today. This is not necessarily surprising considering the company’s five-year track record of earnings growth.

Below you can see how EPS has changed over time (click on the image to see the exact values).

We think it is positive that insiders have made significant purchases over the past year. However, future earnings will be much more important to whether current shareholders make money. This free Caterpillar’s interactive earnings, revenue and cash flow report is a good place to start if you want to investigate the stock in more detail.

What about dividends?

When considering investment returns, the difference must be taken into account between Total return for shareholders (TSR) and Share price return. The TSR is a return calculation that takes into account the value of cash dividends (assuming that all dividends received were reinvested) and the calculated value of any discounted capital raisings and spin-offs. The TSR arguably gives a more comprehensive picture of the return generated by a stock. We note that the TSR for Caterpillar over the last 5 years was 226%, which is better than the share price return mentioned above. The dividends paid by the company have thus in total shareholder return.

A different perspective

Caterpillar shareholders have received a 21% return over twelve months (even including dividends), which is not far off the general market return. It is worth noting that the recent return falls short of the 27% that shareholders have received each year for half a decade. Recently, share price growth has slowed. But it must be said that the overall picture is one of good long-term and short-term performance. This arguably makes Caterpillar a stock worth watching. While it is certainly worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider, for example, the ever-present specter of investment risk. We have identified 3 warning signs with Caterpillar (at least 1, possibly serious), and understanding them should be part of your investment process.

There are many other companies whose insiders buy up stock. You probably know this too. not don’t want to miss this free List of undervalued small cap companies that are being bought by insiders.

Please note that the market returns quoted in this article reflect the market weighted average returns of stocks currently trading on U.S. exchanges.

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This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.