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Introducing Graham Holdings (NYSE:GHC), A Stock That Climbed 35% In The Last Three Years

Simply Wall St

Graham Holdings Company (NYSE:GHC) shareholders might be concerned after seeing the share price drop 11% in the last quarter. On the other hand the share price is higher than it was three years ago. However, it's unlikely many shareholders are elated with the share price gain of 35% over that time, given the rising market.

View our latest analysis for Graham Holdings

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Graham Holdings was able to grow its EPS at 12% per year over three years, sending the share price higher. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 10% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Au contraire, the share price change has arguably mimicked the EPS growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

NYSE:GHC Past and Future Earnings, November 7th 2019

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on Graham Holdings's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Graham Holdings, it has a TSR of 38% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Investors in Graham Holdings had a tough year, with a total loss of 2.7% (including dividends) , against a market gain of about 11%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 6.9%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Before forming an opinion on Graham Holdings you might want to consider these 3 valuation metrics.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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 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. Thank you for reading.