Century Communities' (NYSE:CCS) five-year total shareholder returns outpace the underlying earnings growth

September 01, 2022
  •  Updated
November 14, 2022
NYSE:CCS
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While Century Communities, Inc. (NYSE:CCS) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 15% in the last quarter. But in stark contrast, the returns over the last half decade have impressed. In fact, the share price is 110% higher today. To some, the recent pullback wouldn't be surprising after such a fast rise. Of course, that doesn't necessarily mean it's cheap now. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 36% decline over the last twelve months.

Since the long term performance has been good but there's been a recent pullback of 5.4%, let's check if the fundamentals match the share price.

Though if you're not interested in researching what drove CCS's performance, we have a free list of interesting investing ideas to potentially inspire your next investment!

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 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, Century Communities achieved compound earnings per share (EPS) growth of 49% per year. The EPS growth is more impressive than the yearly share price gain of 16% over the same period. So it seems the market isn't so enthusiastic about the stock these days. The reasonably low P/E ratio of 2.60 also suggests market apprehension.

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

earnings-per-share-growth
NYSE:CCS Earnings Per Share Growth September 1st 2022

We know that Century Communities has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Century Communities, it has a TSR of 114% 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

We regret to report that Century Communities shareholders are down 35% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 17%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 16%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. For instance, we've identified 4 warning signs for Century Communities (3 are concerning) that you should be aware of.

If you are like me, then you will 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 US exchanges.

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