Did You Participate In Any Of Admiral Group's (LON:ADM) Respectable 97% Return?
By buying an index fund, investors can approximate the average market return. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, the Admiral Group plc (LON:ADM) share price is up 65% in the last three years, clearly besting the market decline of around 0.2% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 45% in the last year , including dividends .
View our latest analysis for Admiral Group
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 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.
Admiral Group was able to grow its EPS at 13% per year over three years, sending the share price higher. This EPS growth is lower than the 18% 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 three years ago. It's not unusual to see the market 're-rate' a stock, after a few years of growth.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Admiral Group has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. In the case of Admiral Group, it has a TSR of 97% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We're pleased to report that Admiral Group shareholders have received a total shareholder return of 45% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 17%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 3 warning signs for Admiral Group you should be aware of, and 1 of them is a bit unpleasant.
Of course Admiral Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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.
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