Shareholders Of Golden Friends (GTSM:4506) Must Be Happy With Their 143% Total Return

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. For example, long term Golden Friends Corporation (GTSM:4506) shareholders have enjoyed a 85% share price rise over the last half decade, well in excess of the market return of around 60% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 0.9% in the last year , including dividends .

See our latest analysis for Golden Friends

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Over half a decade, Golden Friends managed to grow its earnings per share at 6.3% a year. This EPS growth is slower than the share price growth of 13% 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. And that's hardly shocking given the track record of growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Golden Friends, it has a TSR of 143% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Golden Friends shareholders are up 0.9% for the year (even including dividends). But that return falls short of the market. On the bright side, the longer term returns (running at about 19% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. Keeping this in mind, a solid next step might be to take a look at Golden Friends' dividend track record. This free interactive graph is a great place to start.

We will like Golden Friends better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on TW 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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