For many, the main point of investing in the stock market is to achieve spectacular returns. And highest quality companies can see their share prices grow by huge amounts. For example, theApple Inc.(NASDAQ:AAPL) share price is up a whopping 509% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. On top of that, the share price is up 21% in about a quarter. It really delights us to see such great share price performance for investors.
Since it's been a strong week for Apple shareholders, let's have a look at trend of the longer term fundamentals.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Over half a decade, Apple managed to grow its earnings per share at 23% a year. This EPS growth is slower than the share price growth of 44% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Apple has improved its bottom line lately, but is it going to grow revenue? Thisfreereport showing analyst revenue forecastsshould help you figure out if the EPS growth can be sustained.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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 Apple, it has a TSR of 547% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Apple has rewarded shareholders with a total shareholder return of 34% in the last twelve months. And that does include the dividend. However, the TSR over five years, coming in at 45% per year, is even more impressive. 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 spotted2 warning signs for Appleyou should be aware of.
We will like Apple better if we see some big insider buys. While we wait, check out thisfreelist of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
source：simplywall.st
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