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Transurban Group (ASX:TCL) Has Compensated Shareholders With A Respectable 61% Return On Their Investment

Simply Wall St
·3 mins read

It hasn't been the best quarter for Transurban Group (ASX:TCL) shareholders, since the share price has fallen 18% in that time. But that doesn't change the fact that the returns over the last five years have been pleasing. It has returned a market beating 27% in that time.

Check out our latest analysis for Transurban Group

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, Transurban Group achieved compound earnings per share (EPS) growth of 80% per year. This EPS growth is higher than the 4.8% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. Having said that, the market is still optimistic, given the P/E ratio of 151.90.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

ASX:TCL Past and Future Earnings April 29th 2020
ASX:TCL Past and Future Earnings April 29th 2020

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Transurban Group's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Transurban Group shareholders, and that cash payout contributed to why its TSR of 61%, over the last 5 years, is better than the share price return.

A Different Perspective

It's nice to see that Transurban Group shareholders have received a total shareholder return of 0.8% over the last year. However, the TSR over five years, coming in at 9.9% per year, is even more impressive. 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. 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. For example, we've discovered 5 warning signs for Transurban Group (1 can't be ignored!) that you should be aware of before investing here.

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 AU exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.