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Did The Underlying Business Drive JD Sports Fashion's (LON:JD.) Lovely 311% Share Price Gain?

Simply Wall St
·3-min read

For many, the main point of investing in the stock market is to achieve spectacular returns. While the best companies are hard to find, but they can generate massive returns over long periods. Don't believe it? Then look at the JD Sports Fashion plc (LON:JD.) share price. It's 311% higher than it was five years ago. This just goes to show the value creation that some businesses can achieve. Also pleasing for shareholders was the 22% gain in the last three months.

See our latest analysis for JD Sports Fashion

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 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, JD Sports Fashion managed to grow its earnings per share at 18% a year. This EPS growth is lower than the 33% 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.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

earnings-per-share-growth
earnings-per-share-growth

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What about the Total Shareholder Return (TSR)?

We've already covered JD Sports Fashion's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that JD Sports Fashion's TSR of 318% over the last 5 years is better than the share price return.

A Different Perspective

It's good to see that JD Sports Fashion has rewarded shareholders with a total shareholder return of 7.8% in the last twelve months. However, the TSR over five years, coming in at 33% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. It's always interesting to track share price performance over the longer term. But to understand JD Sports Fashion better, we need to consider many other factors. For instance, we've identified 2 warning signs for JD Sports Fashion that you should be aware of.

We will like JD Sports Fashion 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.

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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