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Century Communities, Inc. (NYSE:CCS) shareholders might be concerned after seeing the share price drop 28% in the last quarter. But that doesn't change the fact that the returns over the last five years have been very strong. We think most investors would be happy with the 174% return, over that period. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. The more important question is whether the stock is too cheap or too expensive today.
While the stock has fallen 6.7% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
Our free stock report includes 3 warning signs investors should be aware of before investing in Century Communities. Read for free now.
There is no denying that markets are sometimes efficient, but prices do not always reflect 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.
Over half a decade, Century Communities managed to grow its earnings per share at 21% a year. That makes the EPS growth particularly close to the yearly share price growth of 22%. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Rather, the share price has approximately tracked EPS growth.
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 Century Communities' 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. We note that for Century Communities the TSR over the last 5 years was 188%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Century Communities shareholders are down 29% for the year (even including dividends), but the market itself is up 9.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 24% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Century Communities better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Century Communities (including 2 which are concerning) .