Yahoo Finance Galliford Try Holdings (LON:GFRD) shareholders have earned a 35% CAGR over the last three years
It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But if you buy shares in a really great company, you can more than double your money. To wit, the Galliford Try Holdings plc (LON:GFRD) share price has flown 103% in the last three years. How nice for those who held the stock! On the other hand, the stock price has retraced 5.9% in the last week. But note that the broader market is down 2.2% since last week, and this may have impacted Galliford Try Holdings' share price.
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.
View our latest analysis for Galliford Try Holdings
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 three years of share price growth, Galliford Try Holdings moved from a loss to profitability. Given the importance of this milestone, it's not overly surprising that the share price has increased strongly.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how Galliford Try Holdings has grown profits over the years, but the future is more important for shareholders. This free interactive report on Galliford Try Holdings' balance sheet strength 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. 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. In the case of Galliford Try Holdings, it has a TSR of 144% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We're pleased to report that Galliford Try Holdings shareholders have received a total shareholder return of 57% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 37%. Therefore it seems like sentiment around the company has been positive lately. 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 Galliford Try Holdings better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Galliford Try Holdings you should know about.
Of course Galliford Try Holdings 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 British 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.
