Yahoo Finance Investing in Impax Asset Management Group (LON:IPX) five years ago would have delivered you a 215% gain
The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For example, the Impax Asset Management Group Plc (LON:IPX) share price has soared 184% in the last half decade. Most would be very happy with that. On top of that, the share price is up 36% in about a quarter.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
Check out our latest analysis for Impax Asset Management Group
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Over half a decade, Impax Asset Management Group managed to grow its earnings per share at 28% a year. This EPS growth is reasonably close to the 23% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. In fact, the share price seems to largely reflect the EPS growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how Impax Asset Management Group has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Impax Asset Management Group the TSR over the last 5 years was 215%, 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
We regret to report that Impax Asset Management Group shareholders are down 29% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 2.2%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 26%, 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 2 warning signs we've spotted with Impax Asset Management Group (including 1 which doesn't sit too well with us) .
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 British 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.
