Those who invested in Mortgage Advice Bureau (Holdings) (LON:MAB1) five years ago are up 43%
When we invest, we're generally looking for stocks that outperform the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, long term Mortgage Advice Bureau (Holdings) plc (LON:MAB1) shareholders have enjoyed a 21% share price rise over the last half decade, well in excess of the market decline of around 1.8% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 8.9% , including dividends .
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
Check out our latest analysis for Mortgage Advice Bureau (Holdings)
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).
Mortgage Advice Bureau (Holdings)'s earnings per share are down 5.1% per year, despite strong share price performance over five years.
The strong decline in earnings per share suggests the market isn't using EPS to judge the company. Given that EPS is down, but the share price is up, it seems clear the market is focussed on other aspects of the business, at the moment.
We note that the dividend is higher than it was previously - always nice to see. Maybe dividend investors have helped support the share price. We'd posit that the revenue growth over the last five years, of 15% per year, would encourage people to invest.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, Mortgage Advice Bureau (Holdings)'s TSR for the last 5 years was 43%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Mortgage Advice Bureau (Holdings) has rewarded shareholders with a total shareholder return of 8.9% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 7%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Even so, be aware that Mortgage Advice Bureau (Holdings) is showing 2 warning signs in our investment analysis , and 1 of those shouldn't be ignored...
We will like Mortgage Advice Bureau (Holdings) 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 British 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.
