Does City Service's (WSE:CTS) Share Price Gain of 21% Match Its Business Performance?

While City Service SE (WSE:CTS) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 24% in the last quarter. But over three years, the returns would have left most investors smiling In the last three years the share price is up, 21%: better than the market.

See our latest analysis for City Service

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over the last three years, City Service failed to grow earnings per share, which fell 12% (annualized). So we doubt that the market is looking to EPS for its main judge of the company's value. Therefore, we think it's worth considering other metrics as well.

We note that the dividend is higher than it was preciously, so that may have assisted the share price. It could be that the company is reaching maturity and dividend investors are buying for the yield.

If you are thinking of buying or selling City Service stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, City Service's TSR for the last 3 years was 85%, 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

The last twelve months weren't great for City Service shares, which performed worse than the market, costing holders 4.8%, including dividends. Meanwhile, the broader market slid about 4.2%, likely weighing on the stock. Fortunately the longer term story is brighter, with total returns averaging about 23% per year over three years. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. Before forming an opinion on City Service you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.

Of course City Service 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 PL 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.