If You Had Bought JD Sports Fashion (LON:JD.) Stock Five Years Ago, You Could Pocket A 306% Gain Today

By
Simply Wall St
Published
June 28, 2021
LSE:JD.
Source: Shutterstock

Long term investing can be life changing when you buy and hold the truly great businesses. While the best companies are hard to find, but they can generate massive returns over long periods. To wit, the JD Sports Fashion plc (LON:JD.) share price has soared 306% over five years. This just goes to show the value creation that some businesses can achieve. Also pleasing for shareholders was the 11% gain in the last three months. But this could be related to the strong market, which is up 5.3% in the last three months.

View our latest analysis for JD Sports Fashion

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...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, JD Sports Fashion achieved compound earnings per share (EPS) growth of 18% per year. This EPS growth is slower than the share price growth of 32% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings 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:JD. Earnings Per Share Growth June 29th 2021

Dive deeper into JD Sports Fashion's key metrics by checking this interactive graph of JD Sports Fashion'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. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for JD Sports Fashion the TSR over the last 5 years was 311%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that JD Sports Fashion has rewarded shareholders with a total shareholder return of 50% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 33% over half a decade, implying that the company is doing better recently. 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. Even so, be aware that JD Sports Fashion is showing 2 warning signs in our investment analysis , you should know about...

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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