Carlyle Group (NASDAQ:CG) rallies 7.5% this week, taking five-year gains to 123%

The simplest way to invest in stocks is to buy exchange traded funds. But in our experience, buying the right stocks can give your wealth a significant boost. For example, the The Carlyle Group Inc. (NASDAQ:CG) share price is up 86% in the last five years, slightly above the market return. It's fair to say the stock has continued its long term trend in the last year, over which it has risen 34%.

Since the stock has added US$1.2b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Carlyle Group

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. 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.

During five years of share price growth, Carlyle Group actually saw its EPS drop 2.1% per year.

So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Therefore, it's worth taking a look at other metrics to try to understand the share price movements.

On the other hand, Carlyle Group's revenue is growing nicely, at a compound rate of 5.3% over the last five years. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

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

Carlyle Group is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think Carlyle Group will earn in the future (free analyst consensus estimates)

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. We note that for Carlyle Group the TSR over the last 5 years was 123%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Carlyle Group shareholders have received a total shareholder return of 39% over the last year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 17%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Carlyle Group you should know about.

Of course Carlyle Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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

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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.

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