When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, you can make far more than 100% on a really good stock. For example, the The Progressive Corporation (NYSE:PGR) share price has soared 205% in the last half decade. Most would be very happy with that. In more good news, the share price has risen 1.1% in thirty days. But the price may well have benefitted from a buoyant market, since stocks have gained 11% in the last thirty days.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, Progressive achieved compound earnings per share (EPS) growth of 23% per year. So the EPS growth rate is rather close to the annualized share price gain of 25% per year. This indicates that investor sentiment towards the company has not changed a great deal. Indeed, it would appear the share price is reacting to the EPS.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Progressive has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Progressive stock, you should check out this FREE detailed report on its balance sheet.
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 and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Progressive the TSR over the last 5 years was 252%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's nice to see that Progressive shareholders have received a total shareholder return of 11% over the last year. Of course, that includes the dividend. Having said that, the five-year TSR of 29% a year, is even better. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 1 warning sign for Progressive you should be aware of.
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.
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.
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