Patrick Industries, Inc. (NASDAQ:PATK) shareholders might be concerned after seeing the share price drop 12% in the last month. But that scarcely detracts from the really solid long term returns generated by the company over five years. We think most investors would be happy with the 264% return, over that period. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Only time will tell if there is still too much optimism currently reflected in the share price.

Since the long term performance has been good but there's been a recent pullback of 8.3%, let's check if the fundamentals match the share price.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

During five years of share price growth, Patrick Industries achieved compound earnings per share (EPS) growth of 9.7% per year. This EPS growth is slower than the share price growth of 29% 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. And that's hardly shocking given the track record of growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on Patrick Industries' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 Patrick Industries, it has a TSR of 301% 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

It's nice to see that Patrick Industries shareholders have received a total shareholder return of 3.0% over the last year. Of course, that includes the dividend. However, the TSR over five years, coming in at 32% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. It's always interesting to track share price performance over the longer term. But to understand Patrick Industries better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Patrick Industries , and understanding them should be part of your investment process.

Patrick Industries is not the only stock that insiders are buying. For those who like to find lesser know companies 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 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.