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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. One great example is The Goldman Sachs Group, Inc. (NYSE:GS) which saw its share price drive 124% higher over five years. It's down 3.5% in the last seven days.
Since the long term performance has been good but there's been a recent pullback of 3.5%, let's check if the fundamentals match the share price.
Check out our latest analysis for Goldman Sachs 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).
During five years of share price growth, Goldman Sachs Group achieved compound earnings per share (EPS) growth of 9.0% per year. This EPS growth is slower than the share price growth of 18% 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.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Goldman Sachs Group has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Goldman Sachs Group's TSR for the last 5 years was 154%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Goldman Sachs Group has rewarded shareholders with a total shareholder return of 52% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 20% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 2 warning signs for Goldman Sachs Group you should be aware of.