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The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on a lighter note, a good company can see its share price rise well over 100%. One great example is Great-West Lifeco Inc. (TSE:GWO) which saw its share price drive 142% higher over five years. On top of that, the share price is up 16% in about a quarter.
The past week has proven to be lucrative for Great-West Lifeco investors, so let's see if fundamentals drove the company's five-year performance.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, Great-West Lifeco managed to grow its earnings per share at 12% a year. This EPS growth is slower than the share price growth of 19% 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. That's not necessarily surprising considering the five-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 know that Great-West Lifeco has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Great-West Lifeco's TSR for the last 5 years was 218%, 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
We're pleased to report that Great-West Lifeco shareholders have received a total shareholder return of 34% over one year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 26% 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. Before spending more time on Great-West Lifeco it might be wise to click here to see if insiders have been buying or selling shares.