The total return for Capitec Bank Holdings (JSE:CPI) investors has risen faster than earnings growth over the last five years

It hasn't been the best quarter for Capitec Bank Holdings Limited (JSE:CPI) shareholders, since the share price has fallen 11% in that time. But that doesn't change the fact that the returns over the last five years have been pleasing. It has returned a market beating 91% in that time. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 21% decline over the last twelve months.

Since the long term performance has been good but there's been a recent pullback of 5.4%, let's check if the fundamentals match the share price.

Check out our latest analysis for Capitec Bank Holdings

SWOT Analysis for Capitec Bank Holdings

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.

During five years of share price growth, Capitec Bank Holdings achieved compound earnings per share (EPS) growth of 18% per year. The EPS growth is more impressive than the yearly share price gain of 14% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Capitec Bank Holdings' earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Capitec Bank Holdings, it has a TSR of 104% for the last 5 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

While the broader market gained around 0.03% in the last year, Capitec Bank Holdings shareholders lost 18% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 15%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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 instance, we've identified 1 warning sign for Capitec Bank Holdings that you should be aware of.

Capitec Bank Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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