The main point of investing for the long term is to make money. But more than that, you probably want to see it rise more than the market average. Unfortunately for shareholders, while the AXIS Capital Holdings Limited (NYSE:AXS) share price is up 27% in the last five years, that's less than the market return. Meanwhile, the last twelve months saw the share price rise 1.8%.
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In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the five years of share price growth, AXIS Capital Holdings moved from a loss to profitability. That's generally thought to be a genuine positive, so we would expect to see an increasing share price.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that AXIS Capital Holdings has improved its bottom line lately, but is it going to grow revenue? Check if analysts think AXIS Capital Holdings will grow revenue in the future.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, AXIS Capital Holdings's TSR for the last 5 years was 45%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
AXIS Capital Holdings provided a TSR of 4.8% over the year (including dividends). That's fairly close to the broader market return. It has to be noted that the recent return falls short of the 7.7% shareholders have gained each year, over half a decade. Although the share price growth has slowed, the longer term story points to a business well worth watching. Before spending more time on AXIS Capital Holdings it might be wise to click here to see if insiders have been buying or selling shares.
But note: AXIS Capital Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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 email@example.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.