Did CRH's (ISE:CRG) Share Price Deserve to Gain 39%?
When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Better yet, you'd like to see the share price move up more than the market average. But CRH plc (ISE:CRG) has fallen short of that second goal, with a share price rise of 39% over five years, which is below the market return. However, if you include the dividends then the return is market beating. Zooming in, the stock is actually down 11% in the last year.
Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
View our latest analysis for CRH
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the five years of share price growth, CRH moved from a loss to profitability. That's generally thought to be a genuine positive, so we would expect to see an increasing share price. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. Indeed, the CRH share price has gained 8.2% in three years. In the same period, EPS is up 30% per year. This EPS growth is higher than the 2.7% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It might be well worthwhile taking a look at our free report on CRH's earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of CRH, it has a TSR of 57% 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
While it's certainly disappointing to see that CRH shares lost 8.6% throughout the year, that wasn't as bad as the market loss of 12%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 9.4% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. Before deciding if you like the current share price, check how CRH scores on these 3 valuation metrics.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IE exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
