Yahoo Finance at Home Group's (LON:PETS) 67% CAGR outpaced the company's earnings growth over the same three-year period
Investing can be hard but the potential fo an individual stock to pay off big time inspires us. Mistakes are inevitable, but a single top stock pick can cover any losses, and so much more. One such superstar is Pets at Home Group Plc (LON:PETS), which saw its share price soar 323% in three years. It's even up 4.8% in the last week.
Since the stock has added UK£112m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
Check out our latest analysis for at Home Group
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During three years of share price growth, at Home Group achieved compound earnings per share growth of 16% per year. In comparison, the 62% 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. That's not necessarily surprising considering the three-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).
We know that at Home Group has improved its bottom line lately, but is it going to grow revenue? Check if analysts think at Home Group will grow revenue in the future.
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for at Home Group the TSR over the last 3 years was 367%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
at Home Group shareholders are up 28% for the year (even including dividends). Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 22% over half a decade It is possible that returns will improve along with the business fundamentals. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for at Home Group 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.
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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