If you bought JD Sports Fashion (LON: JD.) Stock five years ago, you could pocket a gain of 306% today

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Long term investing can be life changing when you buy and own great businesses. Sure, the best companies are hard to find, but they can generate massive returns over long periods of time. Namely, the JD Sports Fashion plc (LON: JD.) The stock price has climbed 306% in five years. It just shows the value creation that some companies can achieve. The 11% gain over the past three months has also pleased shareholders. But that could be related to the strength of the market, which is up 5.3% in the past three months.

Check out our latest review for JD Sports Fashion

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 … ”By comparing earnings per share (EPS) and changes in stock prices over time, we can get a feel for the changes in investor attitudes towards a company over time.

Over the five years of stock price growth, JD Sports Fashion has achieved compound earnings per share (EPS) growth of 18% per year. This EPS growth is slower than the share price growth of 32% 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 below how the EPS has evolved over time (find out the exact values ​​by clicking on the image).

LSE: JD. Growth in earnings per share June 29, 2021

Dive deeper into JD Sports Fashion’s key metrics by viewing this interactive JD Sports Fashion earnings, revenue and cash flow graph.

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 incorporates the value of any discounted demerger or capital increase, as well as any dividend, based on the assumption that dividends are reinvested. Arguably, the TSR gives a more complete picture of the return generated by a stock. We note that for JD Sports Fashion, the TSR over the past 5 years was 311%, which is better than the share price return mentioned above. This is largely the result of his dividend payments!

A different perspective

It is good to see that JD Sports Fashion has rewarded its shareholders with a total shareholder return of 50% over the past twelve months. Of course, this includes the dividend. This is better than the 33% annualized return over half a decade, which implies that the company has been doing better recently. Someone with an optimistic outlook might view the recent improvement in TSR as indicating that the business itself is improving over time. While it is worth considering the different impacts that market conditions can have on the share price, other factors are even more important. Nevertheless, be aware that JD Sports Fashion shows 2 warning signs in our investment analysis , you must know…

Of course, you might find a fantastic investment looking elsewhere. So take a look at this free list of companies that we believe will increase their profits.

Please note that the market returns quoted in this article reflect the market weighted average returns of stocks currently traded on UK stock exchanges.

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This Simply Wall St article is general in nature. 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 any of the stocks mentioned.
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