These days it’s easy to simply buy an index fund, and your returns should (roughly) match the market. But you can do a lot better than that by buying good quality businesses for attractive prices. For example, the Lamar Advertising Company (REIT) (NASDAQ:LAMR) share price is up 48% in the last five years, slightly above the market return. Also positive is the 19% share price rise over the last year.
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ 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).
During five years of share price growth, Lamar Advertising Company (REIT) achieved compound earnings per share (EPS) growth of 49% per year. The EPS growth is more impressive than the yearly share price gain of 8.1% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Lamar Advertising Company (REIT)’s TSR for the last 5 years was 91%, 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
It’s good to see that Lamar Advertising Company (REIT) has rewarded shareholders with a total shareholder return of 25% in the last twelve months. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 14% per year), it would seem that the stock’s performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before spending more time on Lamar Advertising Company (REIT) it might be wise to click here to see if insiders have been buying or selling shares.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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 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. Thank you for reading.