GUD Holdings (ASX:GUD) Has Gifted Shareholders With A Fantastic 123% Total Return On Their Investment

Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, long term GUD Holdings Limited (ASX:GUD) shareholders have enjoyed a 81% share price rise over the last half decade, well in excess of the market return of around 29% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 34% in the last year , including dividends .

See our latest analysis for GUD Holdings

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Over half a decade, GUD Holdings managed to grow its earnings per share at 21% a year. The EPS growth is more impressive than the yearly share price gain of 13% over the same period. So one could conclude that the broader market has become more cautious towards the stock.

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

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for GUD Holdings the TSR over the last 5 years was 123%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

GUD Holdings' TSR for the year was broadly in line with the market average, at 34%. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 17%. It is possible that management foresight will bring growth well into the future, even if the share price slows down. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 3 warning signs for GUD Holdings that you should be aware of before investing here.

We will like GUD Holdings 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 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.
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