Advertisement
Australia markets closed
  • ALL ORDS

    8,094.30
    -111.20 (-1.36%)
     
  • AUD/USD

    0.6531
    -0.0052 (-0.79%)
     
  • ASX 200

    7,861.20
    -102.50 (-1.29%)
     
  • OIL

    76.20
    -1.39 (-1.79%)
     
  • GOLD

    2,371.40
    -44.30 (-1.83%)
     
  • Bitcoin AUD

    98,480.02
    -3,144.54 (-3.09%)
     
  • CMC Crypto 200

    1,311.17
    -27.01 (-2.02%)
     

Brown & Brown's (NYSE:BRO) 20% CAGR outpaced the company's earnings growth over the same five-year period

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on a lighter note, a good company can see its share price rise well over 100%. For example, the Brown & Brown, Inc. (NYSE:BRO) share price has soared 139% in the last half decade. Most would be very happy with that. In more good news, the share price has risen 15% in thirty days. We note that Brown & Brown reported its financial results recently; luckily, you can catch up on the latest revenue and profit numbers in our company report.

Since it's been a strong week for Brown & Brown shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for Brown & Brown

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.

ADVERTISEMENT

Over half a decade, Brown & Brown managed to grow its earnings per share at 9.5% a year. This EPS growth is slower than the share price growth of 19% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

earnings-per-share-growth
earnings-per-share-growth

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. It might be well worthwhile taking a look at our free report on Brown & Brown's earnings, revenue and cash flow.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Brown & Brown the TSR over the last 5 years was 149%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Brown & Brown shareholders have received a total shareholder return of 10% over the last year. That's including the dividend. Having said that, the five-year TSR of 20% a year, is even better. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. It's always interesting to track share price performance over the longer term. But to understand Brown & Brown better, we need to consider many other factors. For example, we've discovered 1 warning sign for Brown & Brown that you should be aware of before investing here.

Brown & Brown is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here