Introducing iomart Group (LON:IOM), A Stock That Climbed 20% In The Last Five Years

Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make significant gains if you buy good quality businesses at the right price. To wit, the iomart Group share price has climbed 20% in five years, easily topping the market return of 14% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 16% , including dividends .

See our latest analysis for iomart Group

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...' 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, iomart Group achieved compound earnings per share (EPS) growth of 4.0% per year. So the EPS growth rate is rather close to the annualized share price gain of 4% per year. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Rather, the share price has approximately tracked EPS growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Dive deeper into iomart Group's key metrics by checking this interactive graph of iomart Group'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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for iomart Group the TSR over the last 5 years was 32%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

iomart Group shareholders gained a total return of 16% during the year. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 6% over half a decade This suggests the company might be improving over time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for iomart Group that you should be aware of before investing here.

But note: iomart Group 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.

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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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