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Did Cogeco Communications's (TSE:CCA) Share Price Deserve to Gain 87%?

Simply Wall St

When we invest, we're generally looking for stocks that outperform the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. To wit, the Cogeco Communications share price has climbed 87% in five years, easily topping the market return of 7.9% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 69% , including dividends .

View our latest analysis for Cogeco Communications

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 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 the five years of share price growth, Cogeco Communications moved from a loss to profitability. That's generally thought to be a genuine positive, so we would expect to see an increasing share price.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

TSX:CCA Past and Future Earnings, October 14th 2019

It is of course excellent to see how Cogeco Communications has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Cogeco Communications's financial health with this free report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Cogeco Communications the TSR over the last 5 years was 110%, 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 nice to see that Cogeco Communications shareholders have received a total shareholder return of 69% over the last year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 16% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. If you would like to research Cogeco Communications in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

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 CA 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 editorial-team@simplywallst.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.