Advertisement
Australia markets closed
  • ALL ORDS

    8,153.70
    +80.10 (+0.99%)
     
  • AUD/USD

    0.6491
    -0.0044 (-0.68%)
     
  • ASX 200

    7,896.90
    +77.30 (+0.99%)
     
  • OIL

    81.61
    +0.26 (+0.32%)
     
  • GOLD

    2,216.40
    +3.70 (+0.17%)
     
  • Bitcoin AUD

    108,931.20
    +1,293.20 (+1.20%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     

Can You Imagine How Brisbane Broncos's (ASX:BBL) Shareholders Feel About The 46% Share Price Increase?

Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!

When we invest, we're generally looking for stocks that outperform the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, long term Brisbane Broncos Limited (ASX:BBL) shareholders have enjoyed a 46% share price rise over the last half decade, well in excess of the market return of around 13% (not including dividends).

Check out our latest analysis for Brisbane Broncos

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 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).

ADVERTISEMENT

Over half a decade, Brisbane Broncos managed to grow its earnings per share at 0.3% a year. This EPS growth is slower than the share price growth of 7.9% 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 how EPS has changed over time in the image below (click on the chart to see the exact values).

ASX:BBL Past and Future Earnings, July 12th 2019
ASX:BBL Past and Future Earnings, July 12th 2019

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. We note that for Brisbane Broncos the TSR over the last 5 years was 60%, 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

Investors in Brisbane Broncos had a tough year, with a total loss of 16% (including dividends), against a market gain of about 12%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 9.9% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before deciding if you like the current share price, check how Brisbane Broncos scores on these 3 valuation metrics.

But note: Brisbane Broncos may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.