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The main point of investing for the long term is to make money. But more than that, you probably want to see it rise more than the market average. But MSCI Inc. (NYSE:MSCI) has fallen short of that second goal, with a share price rise of 88% over five years, which is below the market return. The last year hasn't been great either, with the stock up just 3.4%.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for MSCI
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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During five years of share price growth, MSCI achieved compound earnings per share (EPS) growth of 16% per year. This EPS growth is higher than the 13% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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. In the case of MSCI, it has a TSR of 97% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
MSCI shareholders gained a total return of 4.7% during the year. But that return falls short of the market. On the bright side, the longer term returns (running at about 15% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand MSCI better, we need to consider many other factors. For example, we've discovered 1 warning sign for MSCI that you should be aware of before investing here.