Yahoo Finance Affiliated Managers Group's (NYSE:AMG) investors will be pleased with their respectable 47% return over the last five years
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 Affiliated Managers Group, Inc. (NYSE:AMG) has fallen short of that second goal, with a share price rise of 45% over five years, which is below the market return. Zooming in, the stock is up a respectable 11% in the last year.
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.
View our latest analysis for Affiliated Managers Group
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 five years of share price growth, Affiliated Managers Group achieved compound earnings per share (EPS) growth of 35% per year. The EPS growth is more impressive than the yearly share price gain of 8% over the same period. So one could conclude that the broader market has become more cautious towards the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 7.73.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Affiliated Managers Group has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Affiliated Managers Group stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Affiliated Managers Group's TSR for the last 5 years was 47%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Affiliated Managers Group provided a TSR of 11% over the last twelve months. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 8% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. It's always interesting to track share price performance over the longer term. But to understand Affiliated Managers Group better, we need to consider many other factors. For instance, we've identified 2 warning signs for Affiliated Managers Group (1 can't be ignored) that you should be aware of.
Of course Affiliated Managers Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
