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We think all investors should try to buy and hold high quality multi-year winners. While the best companies are hard to find, but they can generate massive returns over long periods. Just think about the savvy investors who held Trans-Siberian Gold plc (LON:TSG) shares for the last five years, while they gained 604%. And this is just one example of the epic gains achieved by some long term investors. It's also up 35% in about a month.
It really delights us to see such great share price performance for investors.
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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During five years of share price growth, Trans-Siberian Gold achieved compound earnings per share (EPS) growth of 5.5% per year. This EPS growth is slower than the share price growth of 48% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It might be well worthwhile taking a look at our free report on Trans-Siberian Gold's earnings, revenue and cash flow.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Trans-Siberian Gold's TSR for the last 5 years was 965%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's good to see that Trans-Siberian Gold has rewarded shareholders with a total shareholder return of 61% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 61% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. For example, we've discovered 4 warning signs for Trans-Siberian Gold that you should be aware of before investing here.
Of course Trans-Siberian Gold 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 GB exchanges.
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.
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