BAE Systems (LON:BA.) sheds 3.4% this week, as yearly returns fall more in line with earnings growth

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, you can make far more than 100% on a really good stock. Long term BAE Systems plc (LON:BA.) shareholders would be well aware of this, since the stock is up 283% in five years. Then again, the 8.9% share price decline hasn't been so fun for shareholders.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, BAE Systems achieved compound earnings per share (EPS) growth of 12% per year. This EPS growth is lower than the 31% 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).LSE:BA. Earnings Per Share Growth November 9th 2025

Dive deeper into BAE Systems' key metrics by checking this interactive graph of BAE Systems's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 BAE Systems the TSR over the last 5 years was 344%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that BAE Systems has rewarded shareholders with a total shareholder return of 34% in the last twelve months. That's including the dividend. Having said that, the five-year TSR of 35% a year, is even better. It's always interesting to track share price performance over the longer term. But to understand BAE Systems better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with BAE Systems , and understanding them should be part of your investment process.

Story Continues

We will like BAE Systems better if we see some big insider buys. While we wait, check out this freelist of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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

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