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Auto Trader Group plc (LON:AUTO) shareholders might be concerned after seeing the share price drop 10% in the last month. But don't let that distract from the very nice return generated over three years. After all, the share price is up a market-beating 71% in that time.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
Auto Trader Group was able to grow its EPS at 18% per year over three years, sending the share price higher. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 20% average annual increase in the share price. This suggests that sentiment and expectations have not changed drastically. Rather, the share price has approximately tracked EPS growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Auto Trader Group has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Auto Trader Group will grow revenue in the future.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Auto Trader Group's TSR for the last 3 years was 77%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Pleasingly, Auto Trader Group's total shareholder return last year was 29%. That's including the dividend. So this year's TSR was actually better than the three-year TSR (annualized) of 21%. The improving returns to shareholders suggests the stock is becoming more popular with time. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
We will like Auto Trader Group 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 GB 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 firstname.lastname@example.org. 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.