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Investors Who Bought Bellway (LON:BWY) Shares Five Years Ago Are Now Up 100%

Simply Wall St

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on a lighter note, a good company can see its share price rise well over 100%. For instance, the price of Bellway p.l.c. (LON:BWY) stock is up an impressive 100% over the last five years. Also pleasing for shareholders was the 20% gain in the last three months.

Check out our latest analysis for Bellway

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. 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.

During five years of share price growth, Bellway achieved compound earnings per share (EPS) growth of 30% per year. The EPS growth is more impressive than the yearly share price gain of 15% over the same period. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 7.51 also suggests market apprehension.

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

LSE:BWY Past and Future Earnings, September 14th 2019

It's probably worth noting that the CEO is paid less than the median at similar sized 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 Bellway's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Bellway, it has a TSR of 144% for the last 5 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 Bellway shareholders have received a total shareholder return of 16% over one year. Of course, that includes the dividend. However, that falls short of the 20% TSR per annum it has made for shareholders, each year, over five years. Keeping this in mind, a solid next step might be to take a look at Bellway's dividend track record. This free interactive graph is a great place to start.

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 GB 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.