Investing in Targa Resources (NYSE:TRGP) five years ago would have

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, you can make far more than 100% on a really good stock. For example, the Targa Resources Corp. (NYSE:TRGP) share price has soared 258% in the last half decade. Most would be very happy with that. It’s also good to see the share price up 22% over the last quarter.

So let’s investigate and see if the longer term performance of the company has been in line with the underlying business’ progress.

View our latest analysis for Targa Resources

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…’ One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the five years of share price growth, Targa Resources moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Targa Resources share price is up 229% in the last three years. During the same period, EPS grew by 79% each year. This EPS growth is higher than the 49% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat.

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

We know that Targa Resources has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Targa Resources, it has a TSR of 311% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It’s nice to see that Targa Resources shareholders have received a total shareholder return of 79% over the last year. And that does include the dividend. Since the one-year TSR is better than the…