Yahoo Finance If You Had Bought Telecom Plus (LON:TEP) Shares Three Years Ago You'd Have Made 30%
One simple way to benefit from the stock market is to buy an index fund. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, Telecom Plus PLC (LON:TEP) shareholders have seen the share price rise 30% over three years, well in excess of the market return (8.7%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 13% in the last year , including dividends .
Check out our latest analysis for Telecom Plus
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).
Telecom Plus was able to grow its EPS at 7.2% per year over three years, sending the share price higher. In comparison, the 9.1% 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.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on Telecom Plus'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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Telecom Plus the TSR over the last 3 years was 47%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Telecom Plus provided a TSR of 13% over the last twelve months. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 8.3% per year over five year. This suggests the company might be improving over time. Before forming an opinion on Telecom Plus you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
