Yahoo Finance Boyd Group Services' (TSE:BYD) earnings growth rate lags the 11% CAGR delivered to shareholders
While Boyd Group Services Inc. (TSE:BYD) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 14% in the last quarter. But that doesn't change the fact that the returns over the last five years have been respectable. It's good to see the share price is up 69% in that time, better than its market return of 60%.
While the stock has fallen 5.4% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
View our latest analysis for Boyd Group Services
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, Boyd Group Services achieved compound earnings per share (EPS) growth of 6.9% per year. This EPS growth is slower than the share price growth of 11% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 46.64.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Boyd Group Services has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
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, Boyd Group Services' TSR for the last 5 years was 72%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's nice to see that Boyd Group Services shareholders have received a total shareholder return of 13% over the last year. That's including the dividend. That's better than the annualised return of 11% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Boyd Group Services , and understanding them should be part of your investment process.
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 Canadian 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.
