We think all investors should try to buy and hold high quality multi-year winners. And we've seen some truly amazing gains over the years. For example, the Macquarie Telecom Group Limited (ASX:MAQ) share price is up a whopping 427% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. Also pleasing for shareholders was the 15% gain in the last three months.
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...' 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 the five years of share price growth, Macquarie Telecom Group moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. Indeed, the Macquarie Telecom Group share price has gained 133% in three years. During the same period, EPS grew by 46% each year. This EPS growth is higher than the 33% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It is of course excellent to see how Macquarie Telecom Group has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Macquarie Telecom Group stock, you should check out this FREE detailed report on its balance sheet.
What about the Total Shareholder Return (TSR)?
We've already covered Macquarie Telecom Group's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Macquarie Telecom Group's TSR of 508% over the last 5 years is better than the share price return.
A Different Perspective
It's nice to see that Macquarie Telecom Group shareholders have received a total shareholder return of 36% over the last year. However, the TSR over five years, coming in at 43% per year, is even more impressive. It's always interesting to track share price performance over the longer term. But to understand Macquarie Telecom Group better, we need to consider many other factors. Take risks, for example - Macquarie Telecom Group has 1 warning sign we think you should be aware of.
We will like Macquarie Telecom Group better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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.
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. Thank you for reading.