Is Teleperformance's (EPA:TEP) 295% Share Price Increase Well Justified?

Simply Wall St

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When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, you can make far more than 100% on a really good stock. Long term Teleperformance SE (EPA:TEP) shareholders would be well aware of this, since the stock is up 295% in five years. It's also good to see the share price up 19% over the last quarter. But this could be related to the strong market, which is up 16% in the last three months.

See our latest analysis for Teleperformance

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Over half a decade, Teleperformance managed to grow its earnings per share at 19% a 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 the company in higher regard, these days. 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).

ENXTPA:TEP Past and Future Earnings, April 6th 2019

This free interactive report on Teleperformance's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Teleperformance the TSR over the last 5 years was 325%, 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

We're pleased to report that Teleperformance shareholders have received a total shareholder return of 35% over one year. And that does include the dividend. That's better than the annualised return of 34% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Is Teleperformance cheap compared to other companies? These 3 valuation measures might help you decide.

Of course Teleperformance may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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