Investing in Australian Ethical Investment (ASX:AEF) five years ago would have delivered you a 211% gain

The maximum amount you can lose on any stock (assuming no leverage is used) is 100% of your capital. But on the bright side, you can make well over 100% returns on really good stocks. for example, Australian Ethical Investment Limited (ASX:AEF) shares have surged 186% over the past five years. Most people are very happy with it.

So let’s find out if the company’s long-term performance is in line with the underlying business progress.

See our latest analysis on ethical investing in Australia

To paraphrase Benjamin Graham, the market is a voting machine in the short term, but a weighing machine in the long term. One flawed but valid way to assess how sentiment about a company has changed is to compare earnings per share (EPS) to its stock price.

Ethical investing in Australia has successfully delivered 26% annual earnings per share growth over five years. His EPS growth is pretty close to the stock’s average annual gain of 23%. Therefore, we can conclude that sentiment towards stocks has not changed much. In fact, the stock price seems to largely reflect EPS growth.

Here’s how the EPS changed over time (click the image to see the exact values).

Earnings per share growth

Earnings per share growth

Check out interactive graphs of Australian Ethical Investments Income, Income and Cash Flows to get a closer look at Australian Ethical Investments key metrics.

What is the dividend?

When looking at return on investment, it’s important to consider the following differences: Total shareholder return (TSR) and stock price returnThe stock return reflects only the change in stock price, while the TSR includes the value of dividends (assuming they have been reinvested) and discounted capital raising or spin-off earnings. Arguably, the TSR is a more comprehensive representation of the returns generated by equities. Note that for Australian Ethical Investing, the TSR over the last 5 years is 211%, better than the stock return above. And there are no prizes to speculate that dividend payouts account for the difference primarily!

another point of view

Australian Ethical Investment investors had a tough year, posting a 54% loss (including dividends) against a market gain of around 5.7%. But be aware that even the best stocks can underperform the market for 12 months. On the bright side, our long-term shareholders are profitable, earning 25% per annum over five years. If the fundamental data continue to point to long-term sustainable growth, the current sell-off could be an opportunity worth considering. Is ethical investing in Australia cheaper than other companies? These three rating scales may help you decide.

However, please note the following: Ethical investing in Australia may not be the best stock to buy. Now take a look at this freedom A list of interesting companies with historical revenue growth (and further growth projections).

Please note that the market returns quoted in this article reflect market-weighted average returns for stocks currently traded on the AU exchange.

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This article by Simply Wall St is general in nature. We provide comments based on historical data and analyst projections using only unbiased methodologies and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. We aim to deliver long-term focused analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Is not …

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