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Arthur J. Gallagher (NYSE:AJG) Has Gifted Shareholders With A Fantastic 182% Total Return On Their Investment

Simply Wall St
·3 mins read

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 when you pick a company that is really flourishing, you can make more than 100%. One great example is Arthur J. Gallagher & Co. (NYSE:AJG) which saw its share price drive 150% higher over five years. In the last week the share price is up 3.1%.

See our latest analysis for Arthur J. Gallagher

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, Arthur J. Gallagher managed to grow its earnings per share at 16% a year. This EPS growth is slower than the share price growth of 20% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. 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).

earnings-per-share-growth
earnings-per-share-growth

This free interactive report on Arthur J. Gallagher's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Arthur J. Gallagher the TSR over the last 5 years was 182%, 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 Arthur J. Gallagher has rewarded shareholders with a total shareholder return of 21% in the last twelve months. Of course, that includes the dividend. However, the TSR over five years, coming in at 23% per year, is even more impressive. It's always interesting to track share price performance over the longer term. But to understand Arthur J. Gallagher better, we need to consider many other factors. Even so, be aware that Arthur J. Gallagher is showing 3 warning signs in our investment analysis , you should know about...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.