Did You Miss CMC Markets' (LON:CMCX) Impressive 178% Share Price Gain?

Unfortunately, investing is risky - companies can and do go bankrupt. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the CMC Markets plc (LON:CMCX) share price has soared 178% in the last year. Most would be very happy with that, especially in just one year! It's also good to see the share price up 28% over the last quarter. But this could be related to the strong market, which is up 15% in the last three months. Also impressive, the stock is up 174% over three years, making long term shareholders happy, too.

Check out our latest analysis for CMC Markets

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the last year CMC Markets saw its earnings per share (EPS) increase strongly. We don't think the exact number is a good guide to the sustainable growth rate, but we do think this sort of increase is impressive. So we're unsurprised to see the share price gaining ground. To us, inflection points like this are the best time to take a close look at a stock.

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

It is of course excellent to see how CMC Markets has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at CMC Markets' financial health with this free report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. We note that for CMC Markets the TSR over the last year was 196%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that CMC Markets shareholders have gained 196% (in total) over the last year. And yes, that does include the dividend. So this year's TSR was actually better than the three-year TSR (annualized) of 46%. The improving returns to shareholders suggests the stock is becoming more popular 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. For example, we've discovered 4 warning signs for CMC Markets (1 is a bit unpleasant!) that you should be aware of before investing here.

But note: CMC Markets may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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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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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