Shareholders Of Norfolk Southern (NYSE:NSC) Must Be Happy With Their 204% Total Return

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, you can make far more than 100% on a really good stock. Long term Norfolk Southern Corporation (NYSE:NSC) shareholders would be well aware of this, since the stock is up 172% in five years. Also pleasing for shareholders was the 17% gain in the last three months. But this move may well have been assisted by the reasonably buoyant market (up 8.3% in 90 days).

See our latest analysis for Norfolk Southern

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Over half a decade, Norfolk Southern managed to grow its earnings per share at 6.6% a year. This EPS growth is lower than the 22% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It might be well worthwhile taking a look at our free report on Norfolk Southern's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Norfolk Southern the TSR over the last 5 years was 204%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Norfolk Southern shareholders are up 20% for the year (even including dividends). But that was short of the market average. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 25% over five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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. For example, we've discovered 2 warning signs for Norfolk Southern that you should be aware of before investing here.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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

This article by Simply Wall St is general in nature. 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.

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