Yahoo Finance CareTech Holdings (LON:CTH) Has Gifted Shareholders With A Fantastic 116% Total Return On Their Investment
Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. Buying under-rated businesses is one path to excess returns. To wit, the CareTech Holdings share price has climbed 87% in five years, easily topping the market decline of 8.8% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 28% , including dividends .
Check out our latest analysis for CareTech Holdings
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
During five years of share price growth, CareTech Holdings achieved compound earnings per share (EPS) growth of 0.7% per year. This EPS growth is lower than the 13% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that CareTech Holdings has improved its bottom line lately, but is it going to grow revenue? Check if analysts think CareTech Holdings 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. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, CareTech Holdings' TSR for the last 5 years was 116%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We're pleased to report that CareTech Holdings shareholders have received a total shareholder return of 28% over one year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 17% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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 CareTech Holdings is showing 3 warning signs in our investment analysis , and 1 of those can't be ignored...
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 GB exchanges.
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. 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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