Rogers Communications' (TSE:RCI.B) investors will be pleased with their respectable 38% return over the last five years

By
Simply Wall St
Published
January 20, 2022
TSX:RCI.B
Source: Shutterstock

If you buy and hold a stock for many years, you'd hope to be making a profit. But more than that, you probably want to see it rise more than the market average. Unfortunately for shareholders, while the Rogers Communications Inc. (TSE:RCI.B) share price is up 18% in the last five years, that's less than the market return. Meanwhile, the last twelve months saw the share price rise 3.5%.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

See our latest analysis for Rogers Communications

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 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).

During five years of share price growth, Rogers Communications achieved compound earnings per share (EPS) growth of 8.2% per year. The EPS growth is more impressive than the yearly share price gain of 3% 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) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
TSX:RCI.B Earnings Per Share Growth January 20th 2022

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Dive deeper into the earnings by checking this interactive graph of Rogers Communications' earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Rogers Communications' TSR for the last 5 years was 38%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Rogers Communications shareholders are up 6.9% for the year (even including dividends). But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 7% over half a decade It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand Rogers Communications better, we need to consider many other factors. Even so, be aware that Rogers Communications is showing 1 warning sign in our investment analysis , you should know about...

Rogers Communications is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.

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