Yahoo Finance Winmark's (NASDAQ:WINA) investors will be pleased with their solid 143% return over the last five years
When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But when you pick a company that is really flourishing, you can make more than 100%. For instance, the price of Winmark Corporation (NASDAQ:WINA) stock is up an impressive 122% over the last five years. On top of that, the share price is up 20% in about a quarter.
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 Winmark
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. 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, Winmark achieved compound earnings per share (EPS) growth of 16% per year. This EPS growth is reasonably close to the 17% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. Indeed, it would appear the share price is reacting to the EPS.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on Winmark's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Winmark the TSR over the last 5 years was 143%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Winmark has rewarded shareholders with a total shareholder return of 28% in the last twelve months. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 19% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Winmark better, we need to consider many other factors. For example, we've discovered 3 warning signs for Winmark (1 is concerning!) that you should be aware of before investing here.
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.
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.
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