Yahoo Finance CVC's (ASX:CVC) investors will be pleased with their favorable 48% return over the last five years
While CVC Limited (ASX:CVC) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 16% in the last quarter. But the silver lining is the stock is up over five years. In that time, it is up 20%, which isn't bad, but is below the market return of 51%.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Check out our latest analysis for CVC
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 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.
During the last half decade, CVC became profitable. That's generally thought to be a genuine positive, so we would expect to see an increasing share price.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
This free interactive report on CVC's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for CVC the TSR over the last 5 years was 48%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
CVC provided a TSR of 7.9% over the year (including dividends). That's fairly close to the broader market return. It has to be noted that the recent return falls short of the 8% shareholders have gained each year, over half a decade. Although the share price growth has slowed, the longer term story points to a business well worth watching. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with CVC (at least 1 which is significant) , and understanding them should be part of your investment process.
Of course CVC 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 AU 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.
