Gildan Activewear (TSE:GIL) delivers shareholders decent 12% CAGR over 3 years, surging 11% in the last week alone
By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. For example, Gildan Activewear Inc. (TSE:GIL) shareholders have seen the share price rise 33% over three years, well in excess of the market return (13%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 20% , including dividends .
Since the stock has added CA$873m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
See our latest analysis for Gildan Activewear
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
Gildan Activewear became profitable within the last three years. That would generally be considered a positive, so we'd expect the share price to be up.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Gildan Activewear has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Gildan Activewear's financial health with this free report on its balance sheet.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Gildan Activewear, it has a TSR of 41% 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
It's good to see that Gildan Activewear has rewarded shareholders with a total shareholder return of 20% in the last twelve months. And that does include the dividend. That's better than the annualised return of 3% 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. 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. For instance, we've identified 3 warning signs for Gildan Activewear that you should be aware of.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Canadian exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
