Yahoo Finance Domino's Pizza Enterprises' (ASX:DMP) investors will be pleased with their strong 184% return over the last three years
It hasn't been the best quarter for Domino's Pizza Enterprises Limited (ASX:DMP) shareholders, since the share price has fallen 21% in that time. But that doesn't undermine the rather lovely longer-term return, if you measure over the last three years. Indeed, the share price is up a very strong 168% in that time. So the recent fall in the share price should be viewed in that context. Only time will tell if there is still too much optimism currently reflected in the share price.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
Check out our latest analysis for Domino's Pizza Enterprises
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 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 three years of share price growth, Domino's Pizza Enterprises achieved compound earnings per share growth of 15% per year. This EPS growth is lower than the 39% 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 three years ago. It is quite common to see investors become enamoured with a business, after a few years of solid progress. This optimism is also reflected in the fairly generous P/E ratio of 58.29.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Domino's Pizza Enterprises' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Domino's Pizza Enterprises, it has a TSR of 184% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Domino's Pizza Enterprises has rewarded shareholders with a total shareholder return of 53% in the last twelve months. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 16% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Domino's Pizza Enterprises better, we need to consider many other factors. For example, we've discovered 2 warning signs for Domino's Pizza Enterprises that you should be aware of before investing here.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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.
