By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, Christie Group plc (LON:CTG) shareholders have seen the share price rise 49% over three years, well in excess of the market return (2.3%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 17% in the last year , including dividends .
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 three years of share price growth, Christie Group achieved compound earnings per share growth of 93% per year. This EPS growth is higher than the 14% average annual increase in the share price. So it seems investors have become more cautious about the company, over time.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Christie Group's key metrics by checking this interactive graph of Christie Group's earnings, revenue and cash flow.
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. We note that for Christie Group the TSR over the last 3 years was 62%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We're pleased to report that Christie Group shareholders have received a total shareholder return of 17% over one year. That's including the dividend. There's no doubt those recent returns are much better than the TSR loss of 0.5% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand Christie Group better, we need to consider many other factors. To that end, you should learn about the 4 warning signs we've spotted with Christie Group (including 1 which is is a bit concerning) .
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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