The worst outcome, after buying a company’s stock (assuming there is no leverage), would be to lose all the money you invested. But on the bright side, you can earn well over 100% on a really good stock. A good example is Republic Services, Inc. (NYSE: RSG) which has seen its share price rise 151% in five years. It is also good to see the stock price increase by 11% in the last quarter.
As it has been a strong week for Republic Services shareholders, let’s take a look at the longer-term fundamentals trend.
To quote Buffett, “Ships will sail around the world but the Flat Earth Society will thrive. There will continue to be wide spreads between price and value in the market … ‘An imperfect but straightforward way to examine how a company’s market perception has changed is to compare the evolution of earnings per share (BPA) with the price movement action.
In five years, Republic Services has managed to increase its earnings per share by 11% per year. This EPS growth is slower than the share price growth of 20% per year, over the same period. So it’s fair to assume that the market has a better opinion of the company than it did five years ago. This isn’t necessarily surprising given the track record of five-year earnings growth.
You can see how EPS has changed over time in the image below (click on the graph to see the exact values).
NYSE: RSG Earnings Per Share Growth October 13, 2021
We are happy to report that the CEO is paid more modestly than most CEOs of companies with similar capitalization. It’s always worth keeping an eye on CEO compensation, but a bigger question is whether the company will increase profits over the years. Dive deeper into earnings by checking out this interactive Republic Services Earnings, Revenue and Cash Flow graph.
What about dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. While the share price return reflects only the change in the share price, the TSR includes the value of dividends (assuming they have been reinvested) and the benefit of any capital increase or spin- off updated. So, for companies that pay a generous dividend, the TSR is often much higher than the return on the share price. We note that for Republic Services, the TSR over the past 5 years was 177%, which is better than the share price return mentioned above. The dividends paid by the company thus boosted the total shareholder return.
A different perspective
It is nice to see that Republic Services shareholders have received a 37% total shareholder return over the past year. This includes the dividend. As the 1-year TSR is better than the 5-year TSR (the latter standing at 23% per year), it seems that the performance of the stock has improved in recent times. Since stock price dynamics remain strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It is always interesting to follow the evolution of stock prices over the long term. But to understand Republic Services better, there are many other factors that we need to consider. For example, we discovered 1 warning sign for the services of the Republic which you should know before investing here.
But beware : Republic Services might not be the best stock to buy. So take a look at this free list of interesting companies with past earnings growth (and new growth forecasts).
Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently traded on US stock exchanges.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
Do you have any feedback on this item? Are you worried about the content? Get in touch with us directly. You can also send an email to the editorial team (at) simplywallst.com.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.