Passive investing in index funds can generate returns that are about the same as the overall market. But the truth is, if you buy a quality business at the right price, you can make big profits. for example, CUBE HOLDINGS LIMITED. (ASX:QUB) share price is up 25% over the past five years, slightly outperforming the market return. Zooming in on this, the stock price is up a respectable 16% in the last year.
Let’s look at the underlying fundamentals over the long term and see if they are aligned with shareholder returns.
Check out our latest analysis for Qube Holdings.
Markets are powerful pricing mechanisms, but stock prices reflect not only underlying business performance but also investor sentiment. One imperfect but simple way to consider how the market perception of a company has changed is to compare the change in the earnings per share (EPS) with the share price movement.
Despite Qube Holdings’ strong five-year share price performance, its earnings per share have declined by 5.0% per year.
Since EPS has declined significantly, it seems highly unlikely that market participants are focusing on EPS to value the company. A decline in EPS is uncorrelated with a rise in share price, so it’s worth considering other metrics.
Meanwhile, Qube Holdings’ earnings have been growing steadily at a compound rate of 14% over the past five years. In that case, the company could sacrifice current earnings per share to foster growth.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Qube Holdings is a well-known stock with many analysts covering it, suggesting some future growth is visible. Find out what analysts are predicting for Qube Holdings in this article. interaction Graph of future profit forecast.
What will happen to the dividend?
It’s important to consider not only the share price return but also the total shareholder return for a particular stock. 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 increases and spin-offs. So for companies that pay a generous dividend, the TSR is often much higher than the share price return. We note that Qube Holdings’ TSR over the last five years was 44%, which is better than the share price return mentioned above. And there’s no kudos to speculating that dividend payments are the main explanation for the divergence.
different perspective
It’s good to see that Qube Holdings shareholders received a total shareholder return of 19% over the last year. That includes dividends. The stock appears to have performed better of late, as the 1-year TSR is better than his 5-year TSR (the latter at 8% per annum). Optimists might think that the recent improvement in TSR indicates that the business itself is improving over time. It’s always interesting to track stock performance over the long term. But to understand Qube Holdings better, we need to consider many other factors. For example, we discovered that 1 warning sign for Qube Holdings What you need to know before investing here.
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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 Australian exchanges.
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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
