We think all investors should try to buy and hold high quality multi-year winners. While the best companies are hard to find, but they can generate massive returns over long periods. For example, the AutoNation, Inc. (NYSE:AN) share price is up a whopping 330% in the last half decade, a handsome return for long term holders. This just goes to show the value creation that some businesses can achieve. On top of that, the share price is up 23% in about a quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's 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).

Over half a decade, AutoNation managed to grow its earnings per share at 39% a year. This EPS growth is reasonably close to the 34% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Indeed, it would appear the share price is reacting to the EPS.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free interactive report on AutoNation's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

AutoNation's TSR for the year was broadly in line with the market average, at 27%. We should note here that the five-year TSR is more impressive, at 34% per year. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes AutoNation a stock worth watching. It's always interesting to track share price performance over the longer term. But to understand AutoNation better, we need to consider many other factors. For instance, we've identified 3 warning signs for AutoNation (1 is potentially serious) that you should be aware of.

AutoNation is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket.

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