Stock Analysis

Did You Participate In Any Of Bapcor's (ASX:BAP) Fantastic 104% Return ?

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ASX:BAP
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Bapcor Limited (ASX:BAP) shareholders have seen the share price descend 15% over the month. Looking further back, the stock has generated good profits over five years. After all, the share price is up a market-beating 81% in that time.

See our latest analysis for Bapcor

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).

Over half a decade, Bapcor managed to grow its earnings per share at 19% a year. This EPS growth is higher than the 13% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

earnings-per-share-growth
ASX:BAP Earnings Per Share Growth November 18th 2020

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

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 Bapcor, it has a TSR of 104% 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 Bapcor has rewarded shareholders with a total shareholder return of 3.9% in the last twelve months. And that does include the dividend. However, that falls short of the 15% TSR per annum it has made for shareholders, each year, over five years. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. 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. Even so, be aware that Bapcor is showing 2 warning signs in our investment analysis , you should know about...

Bapcor is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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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