Investing in TClarke (LON:CTO) five years ago would have delivered you a 91% gain
TClarke plc (LON:CTO) shareholders might be concerned after seeing the share price drop 11% in the last month. On the bright side the returns have been quite good over the last half decade. After all, the share price is up a market-beating 59% in that time.
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.
View our latest analysis for TClarke
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During five years of share price growth, TClarke actually saw its EPS drop 3.3% per year.
By glancing at these numbers, we'd posit that the decline in earnings per share is not representative of how the business has changed over the years. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
We note that the dividend is higher than it was previously - always nice to see. Maybe dividend investors have helped support the share price. The revenue growth of about 5.7% per year might also encourage buyers.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
This free interactive report on TClarke's 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 TClarke, it has a TSR of 91% for the last 5 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
We're pleased to report that TClarke shareholders have received a total shareholder return of 11% over one year. And that does include the dividend. Having said that, the five-year TSR of 14% a year, is even better. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with TClarke , and understanding them should be part of your investment process.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British 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.
