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Ritchie Bros. Auctioneers (NYSE:RBA) Has Gifted Shareholders With A Fantastic 140% Total Return On Their Investment

Simply Wall St
·3-min read

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, you can make far more than 100% on a really good stock. For example, the Ritchie Bros. Auctioneers Incorporated (NYSE:RBA) share price has soared 117% in the last half decade. Most would be very happy with that. On top of that, the share price is up 42% in about a quarter.

View our latest analysis for Ritchie Bros. Auctioneers

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 five years of share price growth, Ritchie Bros. Auctioneers achieved compound earnings per share (EPS) growth of 7.1% per year. This EPS growth is slower than the share price growth of 17% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

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

We know that Ritchie Bros. Auctioneers has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Ritchie Bros. Auctioneers stock, you should check out this FREE detailed report on its balance sheet.

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. As it happens, Ritchie Bros. Auctioneers' TSR for the last 5 years was 140%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Ritchie Bros. Auctioneers shareholders have received a total shareholder return of 46% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 19%. 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 Ritchie Bros. Auctioneers better, we need to consider many other factors. Take risks, for example - Ritchie Bros. Auctioneers has 3 warning signs we think you should be aware of.

We will like Ritchie Bros. Auctioneers better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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

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. 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.

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