- United Kingdom
- Specialty Stores
Investing in JD Sports Fashion (LON:JD.) five years ago would have delivered you a 157% gain
The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. For example, the JD Sports Fashion Plc (LON:JD.) share price has soared 154% in the last half decade. Most would be very happy with that. On top of that, the share price is up 39% in about a quarter.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for JD Sports Fashion
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 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 five years of share price growth, JD Sports Fashion achieved compound earnings per share (EPS) growth of 9.0% per year. This EPS growth is lower than the 20% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. It might be well worthwhile taking a look at our free report on JD Sports Fashion's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. In the case of JD Sports Fashion, it has a TSR of 157% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We're pleased to report that JD Sports Fashion shareholders have received a total shareholder return of 19% over one year. Of course, that includes the dividend. However, the TSR over five years, coming in at 21% per year, is even more impressive. It's always interesting to track share price performance over the longer term. But to understand JD Sports Fashion better, we need to consider many other factors. Take risks, for example - JD Sports Fashion has 2 warning signs we think you should be aware of.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British exchanges.
Valuation is complex, but we're helping make it simple.
Find out whether JD Sports Fashion is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
JD Sports Fashion
JD Sports Fashion plc engages in the retail of branded sports fashion and outdoor clothing, footwear, accessories, and equipment for kids, women, and men.
High growth potential with excellent balance sheet.