Those who invested in the Yellow Pages (TSE:Y) five years ago grew by 81%

Generally speaking, the goal of active stock selection is to find companies that offer returns above the market average. And the truth is, you can make big gains if you buy good quality businesses at the right price. Namely, the Yellow Pages stock price has soared 63% in five years, easily outpacing the market return of 27% (excluding dividends).

Let’s take a look at the longer term underlying fundamentals and see if they have been consistent with shareholder returns.

Check out our latest analysis for the Yellow Pages

It is undeniable that markets are sometimes efficient, but prices do not always reflect the underlying performance of companies. An imperfect but simple way to examine the evolution of a company’s perception by the market is to compare the evolution of earnings per share (EPS) with the evolution of the share price.

Over the past half-decade, the Yellow Pages have become profitable. This is widely believed to be a real bright spot, so we would expect to see an increase in the stock price.

You can see how EPS has changed over time in the image below (click on the graph to see the exact values).

earnings per share growth

We know that Yellow Pages has recently improved its results, but will it increase its revenue? If you are interested, you can check this free report showing consensus revenue forecast.

What about dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price performance. TSR is a calculation of return that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of all discounted capital raisings and spinoffs. It’s fair to say that the TSR gives a more complete picture of stocks that pay a dividend. Note that for Yellow Pages the TSR over the last 5 years was 81%, which is better than the stock price return mentioned above. The dividends paid by the company thus inflated the total return to shareholders.

A different perspective

While the broader market lost about 2.1% in the twelve months, Yellow Pages shareholders fared even worse, losing 6.4% (even including dividends). However, it could simply be that the stock price was impacted by greater market jitters. It might be worth keeping an eye on the fundamentals, in case there is a good opportunity. On the positive side, long-term shareholders have made money, with a gain of 13% per year over half a decade. It could be that the recent selloff is an opportunity, so it may be worth checking the fundamentals for signs of a long-term growth trend. While it’s worth considering the various impacts that market conditions can have on the stock price, there are other, even more important factors. For example, we found 1 yellow pages warning sign which you should be aware of before investing here.

Sure, you might find a fantastic investment by 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 average market-weighted returns of stocks currently trading on CA exchanges.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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Calvin W. Soper