Victory Capital Holdings' (NASDAQ:VCTR) 69% CAGR outpaced the company's earnings growth over the same three-year period

By
Simply Wall St
Published
October 11, 2021
NasdaqGS:VCTR
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We think that it's fair to say that the possibility of finding fantastic multi-year winners is what motivates many investors. Mistakes are inevitable, but a single top stock pick can cover any losses, and so much more. One bright shining star stock has been Victory Capital Holdings, Inc. (NASDAQ:VCTR), which is 365% higher than three years ago. On top of that, the share price is up 12% in about a quarter.

Since it's been a strong week for Victory Capital Holdings shareholders, let's have a look at trend of the longer term fundamentals.

Check out our latest analysis for Victory Capital Holdings

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Victory Capital Holdings was able to grow its EPS at 65% per year over three years, sending the share price higher. This EPS growth is remarkably close to the 67% average annual increase in the share price. This observation indicates that the market's attitude to the business hasn't changed all that much. Rather, the share price has approximately tracked EPS growth.

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

earnings-per-share-growth
NasdaqGS:VCTR Earnings Per Share Growth October 11th 2021

It is of course excellent to see how Victory Capital Holdings has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Victory Capital Holdings 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. In the case of Victory Capital Holdings, it has a TSR of 379% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Victory Capital Holdings shareholders have gained 102% (in total) over the last year. And yes, that does include the dividend. That gain actually surpasses the 69% TSR it generated (per year) over three years. The improving returns to shareholders suggests the stock is becoming more popular with time. 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. Even so, be aware that Victory Capital Holdings is showing 2 warning signs in our investment analysis , you should know about...

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.

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 (at) simplywallst.com.

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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.