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Stock pickers are generally looking for stocks that will outperform the broader market. And in our experience, buying the right stocks can give your wealth a significant boost. For example, the Crown Castle International Corp. (REIT) (NYSE:CCI) share price is up 75% in the last 5 years, clearly besting than the market return of around 32% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 33%, including dividends.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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, Crown Castle International (REIT) managed to grow its earnings per share at 28% a year. The EPS growth is more impressive than the yearly share price gain of 12% over the same period. So one could conclude that the broader market has become more cautious towards the stock. Having said that, the market is still optimistic, given the P/E ratio of 83.55.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
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. It might be well worthwhile taking a look at our free report on Crown Castle International (REIT)'s earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Crown Castle International (REIT), it has a TSR of 111% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that Crown Castle International (REIT) shareholders have received a total shareholder return of 33% over one year. Of course, that includes the dividend. That's better than the annualised return of 16% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.