Raymond James Financial (NYSE:RJF) stock performs better than its underlying earnings growth over last five years

Simply Wall St · 10/18 10:00

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, you can make far more than 100% on a really good stock. Long term Raymond James Financial, Inc. (NYSE:RJF) shareholders would be well aware of this, since the stock is up 147% in five years. On top of that, the share price is up 27% in about a quarter.

Since it's been a strong week for Raymond James Financial shareholders, let's have a look at trend of the longer term fundamentals.

See our latest analysis for Raymond James Financial

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Over half a decade, Raymond James Financial managed to grow its earnings per share at 14% a year. This EPS growth is slower than the share price growth of 20% per year, over the same period. 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.

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

earnings-per-share-growth
NYSE:RJF Earnings Per Share Growth October 18th 2024

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Raymond James Financial's earnings, revenue and cash flow.

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. As it happens, Raymond James Financial's TSR for the last 5 years was 167%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Raymond James Financial has rewarded shareholders with a total shareholder return of 45% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 22%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Raymond James Financial better, we need to consider many other factors. For example, we've discovered 1 warning sign for Raymond James Financial that you should be aware of before investing here.

But note: Raymond James Financial 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 American exchanges.