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When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Thomson Reuters Corporation (TSE:TRI) share price has soared 159% in the last half decade. Most would be very happy with that. Meanwhile the share price is 1.9% higher than it was a week ago.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
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, Thomson Reuters managed to grow its earnings per share at 7.3% a year. This EPS growth is lower than the 21% average annual increase in the share price. 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.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Thomson Reuters' key metrics by checking this interactive graph of Thomson Reuters's earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Thomson Reuters, it has a TSR of 191% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that Thomson Reuters shareholders have received a total shareholder return of 17% over one year. That's including the dividend. Having said that, the five-year TSR of 24% a year, is even better. It's always interesting to track share price performance over the longer term. But to understand Thomson Reuters better, we need to consider many other factors. Even so, be aware that Thomson Reuters is showing 1 warning sign in our investment analysis , you should know about...