Investing in Big 5 Sporting Goods (NASDAQ:BGFV) three years ago would have delivered you a 571% gain
Big 5 Sporting Goods Corporation (NASDAQ:BGFV) shareholders might be concerned after seeing the share price drop 14% in the last quarter. But over the last three years the stock has shone bright like a diamond. In fact, the share price has taken off in that time, up 432%. Arguably, the recent fall is to be expected after such a strong rise. The share price action could signify that the business itself is dramatically improved, in that time.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Big 5 Sporting Goods
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.
Big 5 Sporting Goods became profitable within the last three years. Given the importance of this milestone, it's not overly surprising that the share price has increased strongly.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Big 5 Sporting Goods has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Big 5 Sporting Goods' balance sheet strength 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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Big 5 Sporting Goods, it has a TSR of 571% for the last 3 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
It's good to see that Big 5 Sporting Goods has rewarded shareholders with a total shareholder return of 28% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 10% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Big 5 Sporting Goods better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Big 5 Sporting Goods , and understanding them should be part of your investment process.
Of course Big 5 Sporting Goods may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.
