Nasdaq
华尔街日报Centrica's (LON:CNA) investors will be pleased with their incredible 320% return over the last five years
When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. Long term Centrica plc (LON:CNA) shareholders would be well aware of this, since the stock is up 279% in five years. Meanwhile the share price is 2.0% higher than it was a week ago.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
Given that Centrica didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last 5 years Centrica saw its revenue grow at 13% per year. That's a fairly respectable growth rate. Broadly speaking, this solid progress may well be reflected by the healthy share price gain of 31% per year over five years. Given that the business has made good progress on the top line, it would be worth taking a look at the growth trend. When a growth trend accelerates, be it in revenue or earnings, it can indicate an inflection point for the business, which is can often be an opportunity for investors.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Centrica is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts
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. In the case of Centrica, it has a TSR of 320% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We're pleased to report that Centrica shareholders have received a total shareholder return of 40% over one year. Of course, that includes the dividend. That's better than the annualised return of 33% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for Centrica you should be aware of.
Of course Centrica may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British 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.