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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 in contrast you can make much more than 100% if the company does well. To wit, the Navient Corporation (NASDAQ:NAVI) share price has flown 138% in the last three years. That sort of return is as solid as granite. It's also good to see the share price up 16% over the last quarter. But this move may well have been assisted by the reasonably buoyant market (up 11% in 90 days).
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for Navient
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During three years of share price growth, Navient achieved compound earnings per share growth of 26% per year. In comparison, the 33% per year gain in the share price outpaces the EPS growth. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. That's not necessarily surprising considering the three-year track record of earnings growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on Navient's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Navient, it has a TSR of 171% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!