United Company RUSAL (HKG:486) Shareholders Booked A 63% Gain In The Last Five Years

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. For example, long term United Company RUSAL Plc (HKG:486) shareholders have enjoyed a 63% share price rise over the last half decade, well in excess of the market return of around 7.5% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 3.8%.

See our latest analysis for United Company RUSAL

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).

During five years of share price growth, United Company RUSAL actually saw its EPS drop 27% per year.

This means it's unlikely the market is judging the company based on earnings growth. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

In contrast revenue growth of 3.1% per year is probably viewed as evidence that United Company RUSAL is growing, a real positive. In that case, the company may be sacrificing current earnings per share to drive growth.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

United Company RUSAL is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling United Company RUSAL stock, you should check out this free report showing analyst consensus estimates for future profits.

What about the Total Shareholder Return (TSR)?

We've already covered United Company RUSAL's share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Its history of dividend payouts mean that United Company RUSAL's TSR of 77% over the last 5 years is better than the share price return.

A Different Perspective

United Company RUSAL provided a TSR of 3.8% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 12% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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. Even so, be aware that United Company RUSAL is showing 4 warning signs in our investment analysis , and 1 of those shouldn't be ignored...

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 HK 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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