Sturm, Ruger & Company, Inc. (NYSE:RGR) shareholders should be happy to see the share price up 13% in the last month. But that doesn't change the fact that the returns over the last five years have been less than pleasing. You would have done a lot better buying an index fund, since the stock has dropped 50% in that half decade.

While the stock has risen 12% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Looking back five years, both Sturm Ruger's share price and EPS declined; the latter at a rate of 47% per year. The share price decline of 13% per year isn't as bad as the EPS decline. The relatively muted share price reaction might be because the market expects the business to turn around. The high P/E ratio of 223.32 suggests that shareholders believe earnings will grow in the years ahead.

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

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business.

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. In the case of Sturm Ruger, it has a TSR of -37% 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

Sturm Ruger shareholders gained a total return of 6.2% during the year. But that return falls short of the market. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 7% endured over half a decade. It could well be that the business is stabilizing. It's always interesting to track share price performance over the longer term. But to understand Sturm Ruger better, we need to consider many other factors.

Sturm Ruger 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.

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.