OneMain Holdings' (NYSE:OMF) 23% CAGR outpaced the company's earnings growth over the same five-year period
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 OneMain Holdings, Inc. (NYSE:OMF) share price is up 51% in the last five years, that's less than the market return. But if you include dividends then the return is market-beating. On a brighter note, more newer shareholders are probably rather content with the 41% share price gain over twelve months.
On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.
Check out our latest analysis for OneMain Holdings
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 five years of share price growth, OneMain Holdings achieved compound earnings per share (EPS) growth of 10% per year. So the EPS growth rate is rather close to the annualized share price gain of 9% per year. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price has approximately tracked EPS growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It might be well worthwhile taking a look at our free report on OneMain Holdings' earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. In the case of OneMain Holdings, it has a TSR of 181% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's good to see that OneMain Holdings has rewarded shareholders with a total shareholder return of 55% in the last twelve months. That's including the dividend. That's better than the annualised return of 23% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for OneMain Holdings you should be aware of, and 1 of them is significant.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
