Yahoo Finance TopBuild's (NYSE:BLD) earnings growth rate lags the 40% CAGR delivered to shareholders
For many, the main point of investing in the stock market is to achieve spectacular returns. And we've seen some truly amazing gains over the years. Just think about the savvy investors who held TopBuild Corp. (NYSE:BLD) shares for the last five years, while they gained 443%. If that doesn't get you thinking about long term investing, we don't know what will. On the other hand, the stock price has retraced 7.4% in the last week. But this could be related to the soft market, with stocks selling off around 3.7% in the last week.
Since the long term performance has been good but there's been a recent pullback of 7.4%, let's check if the fundamentals match the share price.
See our latest analysis for TopBuild
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During five years of share price growth, TopBuild achieved compound earnings per share (EPS) growth of 38% per year. This EPS growth is reasonably close to the 40% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Rather, the share price has approximately tracked EPS growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on TopBuild's earnings, revenue and cash flow.
A Different Perspective
We're pleased to report that TopBuild shareholders have received a total shareholder return of 81% over one year. That's better than the annualised return of 40% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 TopBuild 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 American exchanges.
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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.
