Stock Analysis

If You Had Bought Savills (LON:SVS) Shares Five Years Ago You'd Have Earned 14% Returns

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LSE:SVS
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When we invest, we're generally looking for stocks that outperform the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. To wit, the Savills share price has climbed 14% in five years, easily topping the market return of 3.6% (ignoring dividends).

View our latest analysis for Savills

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

Over half a decade, Savills managed to grow its earnings per share at 3.2% a year. This EPS growth is higher than the 3% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.

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

earnings-per-share-growth
LSE:SVS Earnings Per Share Growth December 25th 2020

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

What about the Total Shareholder Return (TSR)?

We've already covered Savills' share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Savills' TSR of 30% for the 5 years exceeded its share price return, because it has paid dividends.

A Different Perspective

While the broader market lost about 7.4% in the twelve months, Savills shareholders did even worse, losing 12%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 5% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Savills better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Savills you should know about.

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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