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Victory Capital Holdings' (NASDAQ:VCTR) three-year earnings growth trails the incredible shareholder returns

·3-min read

Generally speaking, investors are inspired to be stock pickers by the potential to find the big winners. You won't get it right every time, but when you do, the returns can be truly splendid. One such superstar is Victory Capital Holdings, Inc. (NASDAQ:VCTR), which saw its share price soar 357% in three years. It's also good to see the share price up 11% over the last quarter.

Since the stock has added US$101m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Victory Capital Holdings

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During three years of share price growth, Victory Capital Holdings achieved compound earnings per share growth of 65% per year. This EPS growth is remarkably close to the 66% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Quite to the contrary, the share price has arguably reflected the EPS growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

earnings-per-share-growth
earnings-per-share-growth

It is of course excellent to see how Victory Capital Holdings has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Victory Capital Holdings stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Victory Capital Holdings, it has a TSR of 371% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Pleasingly, Victory Capital Holdings' total shareholder return last year was 93%. And yes, that does include the dividend. So this year's TSR was actually better than the three-year TSR (annualized) of 68%. Given the track record of solid returns over varying time frames, it might be worth putting Victory Capital Holdings on your watchlist. It's always interesting to track share price performance over the longer term. But to understand Victory Capital Holdings better, we need to consider many other factors. For example, we've discovered 2 warning signs for Victory Capital Holdings that you should be aware of before investing here.

But note: Victory Capital Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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