Investing in McMillan Shakespeare (ASX:MMS) three years ago would have delivered you a 110% gain
It hasn't been the best quarter for McMillan Shakespeare Limited (ASX:MMS) shareholders, since the share price has fallen 12% in that time. But don't let that distract from the very nice return generated over three years. In fact, the company's share price bested the return of its market index in that time, posting a gain of 70%.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
See our latest analysis for McMillan Shakespeare
There is no denying that markets are sometimes efficient, but prices do not always reflect 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).
McMillan Shakespeare was able to grow its EPS at 286% per year over three years, sending the share price higher. This EPS growth is higher than the 19% average annual increase in the share price. So it seems investors have become more cautious about the company, over time.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how McMillan Shakespeare has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of McMillan Shakespeare, it has a TSR of 110% 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
We're pleased to report that McMillan Shakespeare shareholders have received a total shareholder return of 33% over one year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 6% 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 McMillan Shakespeare better, we need to consider many other factors. For instance, we've identified 2 warning signs for McMillan Shakespeare that you should be aware of.
We will like McMillan Shakespeare better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian 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.
