D.R. Horton (NYSE:DHI) shareholders have earned a 19% CAGR over the last five years

When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. One great example is D.R. Horton, Inc. (NYSE:DHI) which saw its share price drive 121% higher over five years. It's also good to see the share price up 22% over the last quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

See our latest analysis for D.R. Horton

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over half a decade, D.R. Horton managed to grow its earnings per share at 43% a year. The EPS growth is more impressive than the yearly share price gain of 17% over the same period. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 6.00 also suggests market apprehension.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It is of course excellent to see how D.R. Horton has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling D.R. Horton stock, you should check out this FREE detailed report on its balance sheet.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, D.R. Horton's TSR for the last 5 years was 135%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that D.R. Horton shareholders have received a total shareholder return of 18% over the last year. That's including the dividend. Having said that, the five-year TSR of 19% a year, is even better. 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 example, we've discovered 1 warning sign for D.R. Horton that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.