Long-term investing can be life-changing when you buy and hold truly great companies. While not every stock performs well, when investors do win, they can make big gains. For example this Eli Lilly and company (NYSE:LLY) The stock price is up a whopping 753% over the last half decade, a handsome return for long-term holders. This just shows the value creation that some companies can achieve. We're really pleased that the share price has performed so well for investors.

With this in mind, it is worth considering whether the company's underlying fundamentals have been the driver of long-term performance or whether there are some discrepancies.

Check out our latest analysis for Eli Lilly

To paraphrase Benjamin Graham: In the short term the market is a voting machine, but in the long term it is a weighing machine. 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).

In five years of stock price growth, Eli Lilly achieved average earnings per share (EPS) growth of 14% per year. This EPS growth is lower than the 54% average annual increase in the share price. This suggests that market participants hold the company in higher esteem these days. That's not necessarily surprising given its five-year track record of earnings growth. This optimism is reflected in the relatively high P/E ratio of 112.39.

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

We know Eli Lilly has been improving its bottom line lately, but will it increase its sales? If you are interested you can check this out free Report with consensus sales forecasts.

What about dividends?

In addition to 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, as well as any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often much higher than the share price return. In fact, Eli Lilly's TSR over the last five years was 814%, which is higher than the share price return mentioned earlier. This is mainly due to the dividend payments!

A different perspective

It's good to see that Eli Lilly has rewarded shareholders with a total return of 52% over the last twelve months. Of course, this also includes the dividend. Even more impressive, however, is the five-year TSR, which is 56% per annum. It is always interesting to follow the development of the share price over the longer term. But to better understand Eli Lilly, we need to consider many other factors. Consider, for example, the ever-present specter of investment risk. We've identified two warning signs with Eli Lilly and understanding them should be part of your investment process.

The story continues

We'll like Eli Lilly better if we see some big insider buying. Check this out while we wait free List of undervalued stocks (mainly small caps) with significant, recent insider buying.

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

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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term focused analysis based on fundamental data. Note that our analysis may not reflect the latest price-sensitive company announcements or qualitative material. Simply Wall St has no positions in any stocks mentioned.