Yahoo Finance The total return for DICK'S Sporting Goods (NYSE:DKS) investors has risen faster than earnings growth over the last three years
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 DICK'S Sporting Goods, Inc. (NYSE:DKS), which saw its share price soar 510% in three years. On top of that, the share price is up 14% in about a quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report. We love happy stories like this one. The company should be really proud of that performance!
Although DICK'S Sporting Goods has shed US$432m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
View our latest analysis for DICK'S Sporting Goods
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 three years of share price growth, DICK'S Sporting Goods achieved compound earnings per share growth of 53% per year. In comparison, the 83% 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.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on DICK'S Sporting Goods' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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, DICK'S Sporting Goods' TSR for the last 3 years was 575%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's good to see that DICK'S Sporting Goods has rewarded shareholders with a total shareholder return of 28% in the last twelve months. That's including the dividend. However, that falls short of the 37% TSR per annum it has made for shareholders, each year, over five years. 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. Take risks, for example - DICK'S Sporting Goods has 4 warning signs (and 1 which shouldn't be ignored) we think you should know about.
DICK'S Sporting Goods is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
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