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Buying shares in the best businesses can build meaningful wealth for you and your family. While the best companies are hard to find, but they can generate massive returns over long periods. For example, the Lifestyle Communities Limited (ASX:LIC) share price is up a whopping 355% in the last half decade, a handsome return for long term holders. If that doesn’t get you thinking about long term investing, we don’t know what will. The last week saw the share price soften some 1.9%.
Check out our latest analysis for Lifestyle Communities
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 way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).
Over half a decade, Lifestyle Communities managed to grow its earnings per share at 38% a year. So the EPS growth rate is rather close to the annualized share price gain of 35% per year. This indicates that investor sentiment towards the company has not changed a great deal. Indeed, it would appear the share price is reacting to the EPS.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It’s probably worth noting that the CEO is paid less than the median at similar sized companies. It’s always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Lifestyle Communities’s earnings, revenue and cash flow.
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 discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Lifestyle Communities the TSR over the last 5 years was 369%, 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
Lifestyle Communities shareholders gained a total return of 3.2% during the year. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 36% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.