Investing in Berkeley Group Holdings (LON:BKG) five years ago would have delivered you a 89% gain

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Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. To wit, the Berkeley Group Holdings share price has climbed 54% in five years, easily topping the market return of 11% (ignoring dividends). However, more recent returns haven’t been as impressive as that, with the stock returning just 4.3% in the last year , including dividends .

So let’s assess the underlying fundamentals over the last 5 years and see if they’ve moved in lock-step with shareholder returns.

View our latest analysis for Berkeley Group Holdings

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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, Berkeley Group Holdings managed to grow its earnings per share at 2.0% a year. This EPS growth is lower than the 9% average annual increase in the share price. So it’s fair to assume the market has a higher opinion of the business than it did five years ago. And that’s hardly shocking given the track record of growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

LSE:BKG Earnings Per Share Growth January 5th 2022

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What about the Total Shareholder Return (TSR)?

We’d be remiss not to mention the difference between Berkeley Group Holdings’ total shareholder return (TSR) and its 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. Dividends have been really beneficial for Berkeley Group Holdings shareholders, and that cash payout contributed to why its TSR of 89%, over the last 5 years, is better than the share price return.

A Different Perspective

Berkeley Group Holdings shareholders gained a total return of 4.3% during the year. But that was short of the market average. If we look back over five years, the returns are even better, coming in at 14% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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. Consider risks, for instance. Every company has them, and we’ve spotted 1 warning sign for Berkeley Group Holdings you should know about.

Berkeley Group Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.

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.