Yahoo Finance CMC Markets (LON:CMCX) shareholders have earned a 22% CAGR over the last three years
By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. For example, CMC Markets plc (LON:CMCX) shareholders have seen the share price rise 54% over three years, well in excess of the market decline (6.3%, not including dividends).
So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.
Check out our latest analysis for CMC Markets
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 three years of share price growth, CMC Markets achieved compound earnings per share growth of 43% per year. This EPS growth is higher than the 15% average annual increase in the share price. So it seems investors have become more cautious about the company, over time. We'd venture the lowish P/E ratio of 8.67 also reflects the negative sentiment around the stock.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that CMC Markets has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for CMC Markets the TSR over the last 3 years was 82%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
While the broader market lost about 5.4% in the twelve months, CMC Markets shareholders did even worse, losing 8.0% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 13%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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 CMC Markets is showing 2 warning signs in our investment analysis , and 1 of those is concerning...
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
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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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