Yahoo Finance Shareholders Of Admiral Group (LON:ADM) Must Be Happy With Their 112% Total Return
When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. To wit, the Admiral Group share price has climbed 58% in five years, easily topping the market decline of 14% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 22% in the last year , including dividends .
See our latest analysis for Admiral Group
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 five years of share price growth, Admiral Group achieved compound earnings per share (EPS) growth of 7.6% per year. This EPS growth is slower than the share price growth of 9.6% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. 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. We note that for Admiral Group the TSR over the last 5 years was 112%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that Admiral Group shareholders have received a total shareholder return of 22% over one year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 16% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Admiral Group better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Admiral Group (including 1 which is doesn't sit too well with us) .
We will like Admiral Group better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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. 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. Thank you for reading.
