W. R. Berkley's (NYSE:WRB) five-year earnings growth trails the impressive shareholder returns
The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. One great example is W. R. Berkley Corporation (NYSE:WRB) which saw its share price drive 115% higher over five years. In more good news, the share price has risen 12% in thirty days. We note that W. R. Berkley reported its financial results recently; luckily, you can catch up on the latest revenue and profit numbers in our company report.
The past week has proven to be lucrative for W. R. Berkley investors, so let's see if fundamentals drove the company's five-year performance.
See our latest analysis for W. R. Berkley
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Over half a decade, W. R. Berkley managed to grow its earnings per share at 14% a year. So the EPS growth rate is rather close to the annualized share price gain of 17% per year. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Indeed, it would appear the share price is reacting to the EPS.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that W. R. Berkley has improved its bottom line lately, but is it going to grow revenue? Check if analysts think W. R. Berkley will grow revenue in the future.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, W. R. Berkley's TSR for the last 5 years was 139%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
W. R. Berkley shareholders gained a total return of 30% during the year. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 19% per year over five year. This suggests the company might be improving over time. 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. Even so, be aware that W. R. Berkley is showing 1 warning sign in our investment analysis , you should know about...
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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
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