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When buying shares in a company, it’s worth bearing in mind that the company could fail and you could lose money. However, if you choose a company that is truly prosperous, make over 100.long term Australian Ethical Investments Limited (ASX:AEF) shareholders are well aware of this, as the share price is up 227% in five years. It’s also good to see that the stock price is up 44% quarter-over-quarter.
It’s also worth looking at the company’s fundamentals here. That’s because it helps determine whether long-term shareholder returns are consistent with the performance of the underlying business.
See our latest analysis on ethical investing in Australia
While there is no denying that markets are sometimes efficient, prices do not always reflect underlying company performance. One way he looks at how market sentiment has changed over time is to look at the interaction between a company’s stock price and his earnings per share (EPS).
Over five years, Australian Ethical Investments was able to grow its earnings per share at 4.6% per year. This EPS growth is slower than the 27% annual growth in the share price over the same period. This suggests that market participants have been valuing the company highly recently. This isn’t necessarily surprising, given its track record of profit growth over the past five years. This optimism is reflected in its fairly high P/E ratio of 96.56.
You can see below how EPS has changed over time (unveil the exact values by clicking on the image).
It might be well worth taking a look at ours free A report on Australian Ethical Investment’s earnings, revenue and cash flow.
What will happen to the dividend?
It’s important to consider not only the share price return, but also the total shareholder return for a particular stock. Whereas the price/earnings ratio only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Australian Ethical Investing, the TSR over the last five years was 252%, which is better than the share price return mentioned above. This is primarily due to dividend payments.
different perspective
We’re pleased to report that Australian Ethical Investment shareholders have delivered a total shareholder return of 23% over one year. Of course, this includes dividends. However, this falls short of the 29% annual TSR that the company has provided shareholders each year over five years. 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. For example, consider risk.Every company has them and we discovered that Two warning signs for ethical investing in Australia you should know about.
For people who like searching succeed in investing this free This list of growing companies with recent insider purchasing may be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian exchanges.
Have feedback on this article? Curious about its content? contact Please contact us directly. Alternatively, email our editorial team at Simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and the articles are not intended as financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
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