The main point of investing for the long term is to make money. Better yet, you'd like to see the share price move up more than the market average. Unfortunately for shareholders, while the Amdocs Limited (NASDAQ:DOX) share price is up 44% in the last five years, that's less than the market return. Meanwhile, the last twelve months saw the share price rise 0.6%.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
During five years of share price growth, Amdocs achieved compound earnings per share (EPS) growth of 2.4% per year. This EPS growth is slower than the share price growth of 7.6% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
This free interactive report on Amdocs's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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. In the case of Amdocs, it has a TSR of 54% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Amdocs shareholders are up 2.4% for the year (even including dividends) . But that was short of the market average. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 9.1% over five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. Before forming an opinion on Amdocs you might want to consider these 3 valuation metrics.
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.
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.