Investing in Vertu Motors (LON:VTU) five years ago would have delivered you a 130% gain
When you buy a stock there is always a possibility that it could drop 100%. But on a lighter note, a good company can see its share price rise well over 100%. Long term Vertu Motors plc (LON:VTU) shareholders would be well aware of this, since the stock is up 106% in five years. Also pleasing for shareholders was the 13% gain in the last three months. But this move may well have been assisted by the reasonably buoyant market (up 5.5% in 90 days).
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
View our latest analysis for Vertu Motors
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
During five years of share price growth, Vertu Motors achieved compound earnings per share (EPS) growth of 7.3% per year. This EPS growth is lower than the 16% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. In the case of Vertu Motors, it has a TSR of 130% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Vertu Motors shareholders are up 6.1% for the year (even including dividends). Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 18% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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. Even so, be aware that Vertu Motors is showing 3 warning signs in our investment analysis , you should know about...
Of course Vertu Motors may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com