Should Breedon Group (LON:BREE) Be Disappointed With Their 35% Profit?

When we invest, we're generally looking for stocks that outperform the market average. And in our experience, buying the right stocks can give your wealth a significant boost. For example, the Breedon Group plc (LON:BREE) share price is up 35% in the last 5 years, clearly besting the market return of around 1.9% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 5.9% in the last year.

See our latest analysis for Breedon Group

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Breedon Group actually saw its EPS drop 3.4% per year.

So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

On the other hand, Breedon Group's revenue is growing nicely, at a compound rate of 23% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Breedon Group's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's good to see that Breedon Group has rewarded shareholders with a total shareholder return of 5.9% in the last twelve months. Having said that, the five-year TSR of 6% a year, is even better. It's always interesting to track share price performance over the longer term. But to understand Breedon Group better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Breedon Group .

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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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