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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. To wit, the United Rentals, Inc. (NYSE:URI) share price has soared 361% over five years. This just goes to show the value creation that some businesses can achieve. Also pleasing for shareholders was the 24% gain in the last three months.
Since the long term performance has been good but there's been a recent pullback of 5.6%, let's check if the fundamentals match the share price.
View our latest analysis for United Rentals
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, United Rentals achieved compound earnings per share (EPS) growth of 12% per year. This EPS growth is lower than the 36% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that United Rentals has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
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 United Rentals the TSR over the last 5 years was 367%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's nice to see that United Rentals shareholders have received a total shareholder return of 46% over the last year. That's including the dividend. That's better than the annualised return of 36% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand United Rentals better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with United Rentals .