Is Broadridge Financial Solutions’s (NYSE:BR) 128% Share Price Increase Well Justified?

When you buy shares in a company, it’s worth keeping in mind the possibility that it could fail, and you could lose your money. But on a lighter note, a good company can see its share price rise well over 100%. For instance, the price of Broadridge Financial Solutions, Inc. (NYSE:BR) stock is up an impressive 128% over the last five years. We note the stock price is up 3.4% in the last seven days.

See our latest analysis for Broadridge Financial Solutions

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.

During five years of share price growth, Broadridge Financial Solutions achieved compound earnings per share (EPS) growth of 11% per year. This EPS growth is lower than the 18% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that’s hardly shocking given the track record of growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

NYSE:BR Past and Future Earnings, February 17th 2020
NYSE:BR Past and Future Earnings, February 17th 2020

Dive deeper into Broadridge Financial Solutions’s key metrics by checking this interactive graph of Broadridge Financial Solutions’s earnings, revenue and cash flow.

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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Broadridge Financial Solutions’s TSR for the last 5 years was 150%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Broadridge Financial Solutions provided a TSR of 24% over the year (including dividends) . That’s fairly close to the broader market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 20% per year. Even if the share price growth slows down from here, there’s a good chance that this is business worth watching in the long term. 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 1 warning sign for Broadridge Financial Solutions you should know about.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.