The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. One great example is Fidelity National Information Services, Inc. (NYSE:FIS) which saw its share price drive 134% higher over five years. It's also up 8.2% in about a month. We note that Fidelity National Information Services reported its financial results recently; luckily, you can catch up on the latest revenue and profit numbers in our company report.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.
During five years of share price growth, Fidelity National Information Services actually saw its EPS drop 35% per year.
This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
The modest 1.1% dividend yield is unlikely to be propping up the share price. In contrast revenue growth of 9.2% per year is probably viewed as evidence that Fidelity National Information Services is growing, a real positive. In that case, the company may be sacrificing current earnings per share to drive growth.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Fidelity National Information Services is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 Fidelity National Information Services, it has a TSR of 148% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Fidelity National Information Services shareholders are up 14% for the year (even including dividends). But that return falls short of the market. On the bright side, the longer term returns (running at about 20% a year, over half a decade) look better. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 3 warning signs for Fidelity National Information Services you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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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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. 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.
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