Does Renta 4 Banco's (BME:R4) Share Price Gain of 26% Match Its Business Performance?

Stock pickers are generally looking for stocks that will outperform the broader market. And in our experience, buying the right stocks can give your wealth a significant boost. For example, long term Renta 4 Banco, S.A. (BME:R4) shareholders have enjoyed a 26% share price rise over the last half decade, well in excess of the market return of around 3.8% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 4.1% in the last year.

Check out our latest analysis for Renta 4 Banco

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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).

During five years of share price growth, Renta 4 Banco achieved compound earnings per share (EPS) growth of 5.3% per year. This EPS growth is reasonably close to the 5% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. In fact, the share price seems to largely reflect the EPS growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Renta 4 Banco's TSR for the last 5 years was 42%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Renta 4 Banco has rewarded shareholders with a total shareholder return of 4.1% in the last twelve months. Of course, that includes the dividend. However, the TSR over five years, coming in at 7% per year, is even more impressive. 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. Before deciding if you like the current share price, check how Renta 4 Banco scores on these 3 valuation metrics.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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