The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. One great example is Broadridge Financial Solutions, Inc. (NYSE:BR) which saw its share price drive 141% higher over five years. But it's down 5.6% in the last week. This could be related to the recent financial results, released recently -- you can catch up on the most recent data by reading our company report.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Over half a decade, Broadridge Financial Solutions managed to grow its earnings per share at 11% a year. This EPS growth is lower than the 19% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.
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?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, Broadridge Financial Solutions' TSR for the last 5 years was 163%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Broadridge Financial Solutions shareholders are up 11% for the year (even including dividends). But that was short of the market average. On the bright side, the longer term returns (running at about 21% a year, over half a decade) look better. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand Broadridge Financial Solutions better, we need to consider many other factors. For example, we've discovered 3 warning signs for Broadridge Financial Solutions that you should be aware of before investing here.
But note: Broadridge Financial Solutions may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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. 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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