Yahoo Finance The total return for T. Rowe Price Group (NASDAQ:TROW) investors has risen faster than earnings growth over the last five years
T. Rowe Price Group, Inc. (NASDAQ:TROW) shareholders might be concerned after seeing the share price drop 23% in the last quarter. But that scarcely detracts from the really solid long term returns generated by the company over five years. In fact, the share price is 130% higher today. We think it's more important to dwell on the long term returns than the short term returns. Only time will tell if there is still too much optimism currently reflected in the share price.
In light of the stock dropping 8.7% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.
View our latest analysis for T. Rowe Price 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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Over half a decade, T. Rowe Price Group managed to grow its earnings per share at 24% a year. The EPS growth is more impressive than the yearly share price gain of 18% over the same period. So one could conclude that the broader market has become more cautious towards the stock.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that T. Rowe Price Group has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, T. Rowe Price Group's TSR for the last 5 years was 167%, 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
T. Rowe Price Group shareholders have received returns of 6.2% over twelve months (even including dividends), which isn't far from the general market return. We should note here that the five-year TSR is more impressive, at 22% per year. Although the share price growth has slowed, the longer term story points to a business well worth watching. It's always interesting to track share price performance over the longer term. But to understand T. Rowe Price Group better, we need to consider many other factors. For instance, we've identified 2 warning signs for T. Rowe Price Group that you should be aware of.
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 US 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.