January 20, 2025
The Toronto-Dominion Bank ( TSE:TD ) shareholders should be happy to see the share price up 11% in the last month. But that doesn't help the fact that the three year return is less impressive. In fact, the share price is down 16% in the last three years, falling well short of the market return.
While the stock has risen 6.3% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
See our latest analysis for Toronto-Dominion Bank
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the three years that the share price fell, Toronto-Dominion Bank's earnings per share (EPS) dropped by 15% each year. In comparison the 6% compound annual share price decline isn't as bad as the EPS drop-off. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
This free interactive report on Toronto-Dominion Bank's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Toronto-Dominion Bank's TSR for the last 3 years was -3.6%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
Toronto-Dominion Bank shareholders are up 7.1% for the year (even including dividends). But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 7% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. Before spending more time on Toronto-Dominion Bank it might be wise to click here to see if insiders have been buying or selling shares.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Canadian exchanges.
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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.
