When you buy and hold a stock for the long term, you definitely want it to provide a positive return. But more than that, you probably want to see it rise more than the market average. But Colgate-Palmolive Company (NYSE:CL) has fallen short of that second goal, with a share price rise of 44% over five years, which is below the market return. Some buyers are laughing, though, with an increase of 35% in the last year.

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.

View our latest analysis for Colgate-Palmolive

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Over half a decade, Colgate-Palmolive managed to grow its earnings per share at 5.7% a year. This EPS growth is lower than the 8% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.

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

We know that Colgate-Palmolive has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Colgate-Palmolive the TSR over the last 5 years was 62%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Colgate-Palmolive's TSR for the year was broadly in line with the market average, at 38%. That gain looks pretty satisfying, and it is even better than the five-year TSR of 10% per year. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. It's always interesting to track share price performance over the longer term. But to understand Colgate-Palmolive better, we need to consider many other factors. Even so, be aware that Colgate-Palmolive is showing 1 warning sign in our investment analysis , you should know about...