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Can You Imagine How Elated Creightons's (LON:CRL) Shareholders Feel About Its 665% Share Price Gain?

Simply Wall St

We think all investors should try to buy and hold high quality multi-year winners. And highest quality companies can see their share prices grow by huge amounts. Just think about the savvy investors who held Creightons Plc (LON:CRL) shares for the last five years, while they gained 665%. This just goes to show the value creation that some businesses can achieve. And in the last week the share price has popped 17%.

Anyone who held for that rewarding ride would probably be keen to talk about it.

See our latest analysis for Creightons

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. 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, Creightons achieved compound earnings per share (EPS) growth of 28% per year. This EPS growth is slower than the share price growth of 50% 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. And that's hardly shocking given the track record of growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

LSE:CRL Past and Future Earnings, February 8th 2020

Dive deeper into Creightons's key metrics by checking this interactive graph of Creightons's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Creightons the TSR over the last 5 years was 694%, 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 Creightons has rewarded shareholders with a total shareholder return of 49% in the last twelve months. Of course, that includes the dividend. However, that falls short of the 51% TSR per annum it has made for shareholders, each year, over five years. It's always interesting to track share price performance over the longer term. But to understand Creightons better, we need to consider many other factors. For example, we've discovered 2 warning signs for Creightons that you should be aware of before investing here.

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 GB exchanges.

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.

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. Thank you for reading.