Does QinetiQ Group's (LON:QQ.) Share Price Gain of 14% Match Its Business Performance?

It hasn't been the best quarter for QinetiQ Group plc (LON:QQ.) shareholders, since the share price has fallen 11% in that time. But at least the stock is up over the last five years. In that time, it is up 14%, which isn't bad, but is below the market return of 17%.

Check out our latest analysis for QinetiQ Group

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, QinetiQ Group achieved compound earnings per share (EPS) growth of 0.1% per year. This EPS growth is lower than the 2.6% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.

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

earnings-per-share-growth
earnings-per-share-growth

Dive deeper into QinetiQ Group's key metrics by checking this interactive graph of QinetiQ Group'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. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for QinetiQ Group the TSR over the last 5 years was 26%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While it's certainly disappointing to see that QinetiQ Group shares lost 7.9% throughout the year, that wasn't as bad as the market loss of 14%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 4.8% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. It's always interesting to track share price performance over the longer term. But to understand QinetiQ Group better, we need to consider many other factors. Take risks, for example - QinetiQ Group has 1 warning sign we think you should be aware of.

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

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. 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.

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