Total return decomposes into earnings growth, multiple change and dividend income. Over a year the multiple usually dominates; over a decade earnings growth does. Knowing which one drove a past return tells you how repeatable it was.
Compression is the same force in reverse and is what turns a good business into a bad investment when bought at a high multiple: earnings can grow steadily while the price falls for years.
Example: Northwind Tools rose 34% over a year while EPS grew 14%. The forward multiple went from 22 to 26.5 times, so roughly 20 points of the 34 came from rerating rather than performance.
Related: forward-pe, valuation-multiple, earnings-yield, estimate-revision, comparable-company-analysis