It hasn't been the best quarter for Vista Group International Limited (NZSE:VGL) shareholders, since the share price has fallen 29% in that time. But in stark contrast, the returns over the last half decade have impressed. We think most investors would be happy with the 108% return, over that period. Generally speaking the long term returns will give you a better idea of business quality than short periods can. The more important question is whether the stock is too cheap or too expensive today.
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over half a decade, Vista Group International managed to grow its earnings per share at 7.3% a year. This EPS growth is slower than the share price growth of 16% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 62.29.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. We note that for Vista Group International the TSR over the last 5 years was 115%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Vista Group International shareholders are up 3.7% for the year (even including dividends) . Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 16% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. Is Vista Group International cheap compared to other companies? These 3 valuation measures might help you decide.
We will like Vista Group International 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 NZ exchanges.
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.
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. Thank you for reading.