When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Better yet, you’d like to see the share price move up more than the market average. Unfortunately for shareholders, while the Leidos Holdings, Inc. (NYSE:LDOS) share price is up 45% in the last five years, that’s less than the market return. Over the last twelve months the stock price has risen a very respectable 5.0%.

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.

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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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Leidos Holdings achieved compound earnings per share (EPS) growth of 16% per year. The EPS growth is more impressive than the yearly share price gain of 8% over the same period. So it seems the market isn’t so enthusiastic about the stock these days.

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

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, Leidos Holdings’ TSR for the last 5 years was 55%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Leidos Holdings shareholders are up 6.2% for the year (even including dividends). Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 9% per year for 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. It’s always interesting to track share price performance over the longer term. But to understand Leidos Holdings better, we need to consider many other factors. Take risks, for example – Leidos Holdings has 1 warning sign we think you should be aware of.

Leidos Holdings is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.

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.