Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term Lamar Advertising Company (REIT) (NASDAQ:LAMR) shareholders have enjoyed a 64% share price rise over the last half decade, well in excess of the market return of around 52% (not including dividends). On the other hand, the more recent gains haven’t been so impressive, with shareholders gaining just 27% , including dividends .
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over half a decade, Lamar Advertising Company (REIT) managed to grow its earnings per share at 44% a year. The EPS growth is more impressive than the yearly share price gain of 10% over the same period. So it seems the market isn’t so enthusiastic about the stock these days.
The company’s earnings per share (over time) are depicted in the image below.
We know that Lamar Advertising Company (REIT) has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Lamar Advertising Company (REIT) will grow revenue in the future.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Lamar Advertising Company (REIT), it has a TSR of 110% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It’s good to see that Lamar Advertising Company (REIT) has rewarded shareholders with a total shareholder return of 27% in the last twelve months. Of course, that includes the dividend. That’s better than the annualised return of 16% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Before spending more time on Lamar Advertising Company (REIT) it might be wise to click here to see if insiders have been buying or selling shares.
But note: Lamar Advertising Company (REIT) 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 US exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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