The most you can lose on any stock (assuming you don’t use leverage) is 100% of your money. But if you buy shares in a really great company, you can more than double your money. For example, the Fonterra Co-operative Group Limited (NZSE:FCG) share price has soared 131% in the last three years. How nice for those who held the stock! Also pleasing for shareholders was the 18% gain in the last three months.

So let’s investigate and see if the longer term performance of the company has been in line with the underlying business’ progress.

We’ve found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

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.

During three years of share price growth, Fonterra Co-operative Group achieved compound earnings per share growth of 18% per year. In comparison, the 32% 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.

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

This free interactive report on Fonterra Co-operative Group’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Fonterra Co-operative Group, it has a TSR of 278% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

We’re pleased to report that Fonterra Co-operative Group shareholders have received a total shareholder return of 58% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 21%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we’ve discovered 2 warning signs for Fonterra Co-operative Group that you should be aware of before investing here.