Did You Participate In Any Of McGrath RentCorp's (NASDAQ:MGRC) Fantastic 227% Return ?
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 on the bright side, you can make far more than 100% on a really good stock. For example, the McGrath RentCorp (NASDAQ:MGRC) share price has soared 187% in the last half decade. Most would be very happy with that. Also pleasing for shareholders was the 14% gain in the last three months. But this could be related to the strong market, which is up 6.8% in the last three months.
View our latest analysis for McGrath RentCorp
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over half a decade, McGrath RentCorp managed to grow its earnings per share at 20% a year. So the EPS growth rate is rather close to the annualized share price gain of 23% per year. That suggests that the market sentiment around the company hasn't changed much over that time. Indeed, it would appear the share price is reacting to the EPS.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into McGrath RentCorp's key metrics by checking this interactive graph of McGrath RentCorp'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 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for McGrath RentCorp the TSR over the last 5 years was 227%, 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 McGrath RentCorp has rewarded shareholders with a total shareholder return of 53% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 27%. 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. It's always interesting to track share price performance over the longer term. But to understand McGrath RentCorp better, we need to consider many other factors. Take risks, for example - McGrath RentCorp has 1 warning sign we think you should be aware of.
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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.
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