Should Ibstock (LON:IBST) Be Disappointed With Their 57% Profit?

One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. For example, Ibstock plc (LON:IBST) shareholders have seen the share price rise 57% over three years, well in excess of the market return (5.8%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 31% , including dividends .

View our latest analysis for Ibstock

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 three years of share price growth, Ibstock achieved compound earnings per share growth of 18% per year. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 16% average annual increase in the share price. This suggests that sentiment and expectations have not changed drastically. Quite to the contrary, the share price has arguably reflected the EPS growth.

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

Dive deeper into Ibstock's key metrics by checking this interactive graph of Ibstock's earnings, revenue and cash flow.

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 Ibstock the TSR over the last 3 years was 84%, 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

We're pleased to report that Ibstock rewarded shareholders with a total shareholder return of 31% over the last year. That includes the value of the dividend. That's better than the annualized TSR of 23% over the last three years. Given the track record of solid returns over varying time frames, it might be worth putting Ibstock on your watchlist. 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. Be aware that Ibstock is showing 1 warning sign in our investment analysis , you should know about...

But note: Ibstock 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.