While Installed Building Products, Inc. (NYSE:IBP) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 22% in the last quarter. But in stark contrast, the returns over the last half decade have impressed. We think most investors would be happy with the 280% return, over that period. We think it's more important to dwell on the long term returns than the short term returns. The more important question is whether the stock is too cheap or too expensive today.
In light of the stock dropping 8.6% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.
View our latest analysis for Installed Building Products
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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, Installed Building Products achieved compound earnings per share (EPS) growth of 43% per year. This EPS growth is higher than the 31% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Installed Building Products has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Installed Building Products' financial health with this free report on its balance sheet.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Installed Building Products' TSR for the last 5 years was 299%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We're pleased to report that Installed Building Products shareholders have received a total shareholder return of 44% over one year. That's including the dividend. That's better than the annualised return of 32% 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. It's always interesting to track share price performance over the longer term. But to understand Installed Building Products better, we need to consider many other factors. Take risks, for example - Installed Building Products has 2 warning signs we think you should be aware of.
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 American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.