It is a pleasure to report that the Super Retail Group Limited (ASX:SUL) is up 55% in the last quarter. But over the last half decade, the stock has not performed well. In fact, the share price is down 12%, which falls well short of the return you could get by buying an index fund.
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the unfortunate half decade during which the share price slipped, Super Retail Group actually saw its earnings per share (EPS) improve by 3.5% per year. So it doesn’t seem like EPS is a great guide to understanding how the market is valuing the stock. Alternatively, growth expectations may have been unreasonable in the past.
With EPS gaining and a declining share price, one would suggest the market is cooling on its view of the company. Generally speaking, though, if the company can keep growing EPS then the share price will eventually follow.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Super Retail Group’s key metrics by checking this interactive graph of Super Retail Group’s earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We’ve already covered Super Retail Group’s share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Super Retail Group’s TSR of 11% for the 5 years exceeded its share price return, because it has paid dividends.
A Different Perspective
While it’s never nice to take a loss, Super Retail Group shareholders can take comfort that their trailing twelve month loss of 3.4% wasn’t as bad as the market loss of around 6.2%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 2.1% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we’ve discovered 1 warning sign for Super Retail Group that you should be aware of before investing here.
Of course Super Retail Group 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 AU exchanges.
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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. Thank you for reading.