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Long term investing can be life changing when you buy and hold the truly great businesses. And we've seen some truly amazing gains over the years. Just think about the savvy investors who held LaserBond Limited (ASX:LBL) shares for the last five years, while they gained 419%. And this is just one example of the epic gains achieved by some long term investors. In the last week shares have slid back 5.1%.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
Check out our latest analysis for LaserBond
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, LaserBond achieved compound earnings per share (EPS) growth of 96% per year. This EPS growth is higher than the 39% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It is of course excellent to see how LaserBond has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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 LaserBond the TSR over the last 5 years was 493%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that LaserBond shareholders have received a total shareholder return of 52% over one year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 43% 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 LaserBond better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for LaserBond you should know about.