GreenFirst Forest Products' (TSE:GFP) investors will be pleased with their enviable 613% return over the last three years

While GreenFirst Forest Products Inc. (TSE:GFP) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 17% in the last quarter. In contrast, the return over three years has been impressive. In three years the stock price has launched 214% higher: a great result. It's not uncommon to see a share price retrace a bit, after a big gain. If the business can perform well for years to come, then the recent drop could be an opportunity.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

View our latest analysis for GreenFirst Forest Products

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

GreenFirst Forest Products became profitable within the last three years. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that GreenFirst Forest Products has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling GreenFirst Forest Products stock, you should check out this FREE detailed report on its balance sheet.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between GreenFirst Forest Products' total shareholder return (TSR) and its share price change, which we've covered above. 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. GreenFirst Forest Products hasn't been paying dividends, but its TSR of 613% exceeds its share price return of 214%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

While the broader market gained around 1.2% in the last year, GreenFirst Forest Products shareholders lost 21%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 41%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with GreenFirst Forest Products , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here