For us, stock picking is in large part the hunt for the truly magnificent stocks. You won't get it right every time, but when you do, the returns can be truly splendid. One bright shining star stock has been Johns Lyng Group Limited (ASX:JLG), which is 671% higher than three years ago. On top of that, the share price is up 29% in about a quarter. It really delights us to see such great share price performance for investors.

Since the stock has added AU$83m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Johns Lyng Group

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During three years of share price growth, Johns Lyng Group achieved compound earnings per share growth of 15% per year. In comparison, the 98% per year gain in the share price outpaces the EPS growth. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It's not unusual to see the market 're-rate' a stock, after a few years of growth. This optimism is also reflected in the fairly generous P/E ratio of 77.72.

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

We know that Johns Lyng Group has improved its bottom line lately, but is it going to grow revenue? You could check out this freereport showing analyst revenue forecasts.

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 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 Johns Lyng Group, it has a TSR of 705% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!



A Different Perspective

Pleasingly, Johns Lyng Group's total shareholder return last year was 122%. And yes, that does include the dividend. That gain actually surpasses the 100% TSR it generated (per year) over three years. Given the track record of solid returns over varying time frames, it might be worth putting Johns Lyng Group on your watchlist. 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. Case in point: We've spotted  1 warning sign for Johns Lyng Group you should be aware of.

Of course Johns Lyng Group may not be the best stock to buy. So you may wish to see this freecollection of growth stocks.

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

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.

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