Yahoo Finance Domino's Pizza Group (LON:DOM) stock performs better than its underlying earnings growth over last three years
Domino's Pizza Group plc (LON:DOM) shareholders might be concerned after seeing the share price drop 13% in the last month. But that doesn't change the fact that the returns over the last three years have been pleasing. After all, the share price is up a market-beating 40% in that time.
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
Check out our latest analysis for Domino's Pizza Group
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).
During three years of share price growth, Domino's Pizza Group achieved compound earnings per share growth of 8.5% per year. In comparison, the 12% per year gain in the share price outpaces the EPS growth. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It's not unusual to see the market 're-rate' a stock, after a few years of growth.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
This free interactive report on Domino's Pizza Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Domino's Pizza Group the TSR over the last 3 years was 52%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While the broader market gained around 0.7% in the last year, Domino's Pizza Group shareholders lost 9.9% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Domino's Pizza Group better, we need to consider many other factors. Take risks, for example - Domino's Pizza Group has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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.
