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Long term investing can be life changing when you buy and hold the truly great businesses. While the best companies are hard to find, but they can generate massive returns over long periods. Don't believe it? Then look at the Creightons Plc (LON:CRL) share price. It's 789% higher than it was five years ago. And this is just one example of the epic gains achieved by some long term investors. In the last week shares have slid back 4.8%.
We love happy stories like this one. The company should be really proud of that performance!
View our latest analysis for Creightons
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).
During five years of share price growth, Creightons achieved compound earnings per share (EPS) growth of 52% per year. This EPS growth is reasonably close to the 55% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Indeed, it would appear the share price is reacting to the EPS.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Creightons' 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. We note that for Creightons the TSR over the last 5 years was 834%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's nice to see that Creightons shareholders have received a total shareholder return of 35% over the last year. Of course, that includes the dividend. Having said that, the five-year TSR of 56% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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. Case in point: We've spotted 3 warning signs for Creightons you should be aware of, and 1 of them is potentially serious.