Nexus (ETR: NXU) surges 5.7% this week, although earnings growth still falls short of five-year shareholder returns
We believe all investors should try to buy and hold high quality multi-year winners. While not all stocks work well, when investors win they can win big. You do not believe it ? Then watch the Nexus SA (ETR: NXU) share price. It’s 308%. 100 more than five years ago. It just shows the value creation that some companies can achieve. On top of that, the share price rose 23% in about a quarter.
Based on a strong 7-day performance, let’s check out what role company fundamentals have played in generating long-term returns for shareholders.
See our latest review for Nexus
While the markets are a powerful pricing mechanism, stock prices reflect investor sentiment, not just the underlying performance of the company. An imperfect but straightforward way to consider how a company’s market perception has changed is to compare the evolution of earnings per share (EPS) with the movement of the share price.
Over the five years of stock price growth, Nexus has achieved compound earnings per share (EPS) growth of 17% per year. This EPS growth is slower than the share price growth of 32% per year over the same period. This suggests that market participants hold society in the highest regard these days. This isn’t necessarily surprising given the track record of five-year earnings growth. This optimism is visible in its rather high P / E ratio of 72.90.
The company’s earnings per share (over time) is shown in the image below (click to see exact numbers).
We know that Nexus has improved its results lately, but will it increase its revenue? If you are interested, you can check this free report showing consensus revenue forecast.
What about dividends?
In addition to measuring stock price performance, investors should also consider the total shareholder return (TSR). While the share price return reflects only the change in the share price, the TSR includes the value of dividends (assuming they have been reinvested) and the benefit of any capital increase or spin- off updated. So, for companies that pay a generous dividend, the TSR is often much higher than the return on the share price. In the case of Nexus, it has a TSR of 317% for the past 5 years. This exceeds the return on its share price that we mentioned earlier. The dividends paid by the company thus boosted the total shareholder return.
A different perspective
It’s good to see that Nexus has rewarded its shareholders with a total shareholder return of 63% over the past twelve months. Of course, this includes the dividend. As the 1-year TSR is better than the 5-year TSR (the latter standing at 33% per year), it seems that the stock’s performance has improved in recent times. Someone with an optimistic outlook might view the recent improvement in TSR as indicating that the business itself is improving over time. Is Nexus cheap compared to other companies? These 3 evaluation measures could help you decide.
Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks that currently trade on the DE stock exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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