The most you can lose on a stock (assuming you don’t use leverage) is 100% of your money. But the good news is that if you buy shares of a high-quality company at the right price, you can gain well over 100%. A good example is Seven Group Holdings Limited (ASX:SVW), whose share price has risen 141% in five years and is up 6.2% in the last week.

With the stock’s market cap increasing by AU$930 million in the past week alone, let’s see if the underlying performance has driven the long-term returns.

Check out our latest analysis for Seven Group Holdings

To quote Buffett, “Ships will sail around the world, but the Flat Earth Society will flourish. There will continue to be huge discrepancies between price and value in the marketplace…” A flawed but reasonable way to assess how sentiment toward a company has changed is to compare earnings per share (EPS) to the share price.

Over half a decade, Seven Group Holdings managed to grow its earnings per share by 14% per year. This EPS growth is slower than the share price growth of 19% per year over the same period. This suggests that market participants value the company more highly these days. And that’s hardly surprising given its growth track record.

The image below shows how EPS has evolved over time (if you click on the image you can see greater detail).

The free Seven Group Holdings’ interactive earnings, revenue and cash flow report is a good place to start if you want to investigate the stock further.

What about dividends?

It’s important to consider the total shareholder return, as well as the share price return for each stock. The TSR includes the value of any spin-offs or discounted capital raisings, as well as any dividends, based on the assumption that the dividends are reinvested. It’s fair to say that the TSR gives a more comprehensive picture of the return generated by a stock. We note that the TSR for Seven Group Holdings over the last 5 years was 172%, which is better than the share price return mentioned above. This is largely due to the dividend payments!

A different perspective

It’s nice to see that Seven Group Holdings has rewarded shareholders with a total return of 48% over the last twelve months. This includes the dividend, of course. This return is better than the five-year annual TSR of 22%. Therefore, sentiment towards the company seems to have been positive recently. Someone with an optimistic perspective might view the recent improvement in the TSR as an indication that the business itself is getting better with time. It’s always interesting to follow share price trends over a longer period of time. But to better understand Seven Group Holdings, we need to consider many other factors. Even so, it’s important to be aware that Seven Group Holdings 2 warning signals in our investment analysis and one of them is a bit uncomfortable…

The story continues

We’ll like Seven Group Holdings better if we see some big insider buying. While we wait, check it out here free List of undervalued stocks (mostly small caps) with significant recent insider purchases.

Please note that the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian exchanges.

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This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.