Stock Analysis

Ashtead Group (LON:AHT) Has Rewarded Shareholders With An Exceptional 301% Total Return On Their Investment

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LSE:AHT
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The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. For instance, the price of Ashtead Group plc (LON:AHT) stock is up an impressive 269% over the last five years. It's also good to see the share price up 23% over the last quarter. But this could be related to the strong market, which is up 14% in the last three months.

See our latest analysis for Ashtead Group

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, Ashtead Group achieved compound earnings per share (EPS) growth of 14% per year. This EPS growth is lower than the 30% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

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

earnings-per-share-growth
LSE:AHT Earnings Per Share Growth January 16th 2021

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Ashtead Group's TSR for the last 5 years was 301%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Ashtead Group shareholders have received a total shareholder return of 45% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 32%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Take risks, for example - Ashtead Group has 1 warning sign we think you should be aware of.

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 GB exchanges.

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About LSE:AHT

Ashtead Group

Ashtead Group plc, together with its subsidiaries, engages in the construction, industrial, and general equipment rental business in the United States, the United Kingdom, and Canada.

Solid track record with adequate balance sheet and pays a dividend.