Investing can be hard but the potential fo an individual stock to pay off big time inspires us. But when you hold the right stock for the right time period, the rewards can be truly huge. One bright shining star stock has been Rheinmetall AG (ETR:RHM), which is 482% higher than three years ago. On top of that, the share price is up 82% in about a quarter. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report.

Since it's been a strong week for Rheinmetall shareholders, let's have a look at trend of the longer term fundamentals.

Check out our latest analysis for Rheinmetall

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During three years of share price growth, Rheinmetall achieved compound earnings per share growth of 31% per year. This EPS growth is lower than the 80% average annual increase in the share price. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It's not unusual to see the market 're-rate' a stock, after a few years of growth.

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

It is of course excellent to see how Rheinmetall has grown profits over the years, but the future is more important for shareholders. This free interactive report on Rheinmetall's balance sheet strength is a great place to start, if you want to investigate the stock further.

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 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, Rheinmetall's TSR for the last 3 years was 517%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Rheinmetall has rewarded shareholders with a total shareholder return of 94% in the last twelve months. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 43% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before deciding if you like the current share price, check how Rheinmetall scores on these 3 valuation metrics.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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