Optimism for Toronto-Dominion Bank (TSE:TD) has grown this past week, despite five-year decline in earnings

Simply Wall St · 04/18 10:01

The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share price rise faster than the market. But The Toronto-Dominion Bank (TSE:TD) has fallen short of that second goal, with a share price rise of 55% over five years, which is below the market return. Over the last twelve months the stock price has risen a very respectable 6.5%.

The past week has proven to be lucrative for Toronto-Dominion Bank investors, so let's see if fundamentals drove the company's five-year performance.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 five years of share price growth, Toronto-Dominion Bank actually saw its EPS drop 6.5% per year.

This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

In fact, the dividend has increased over time, which is a positive. It could be that the company is reaching maturity and dividend investors are buying for the yield. The revenue growth of about 8.7% per year might also encourage buyers.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
TSX:TD Earnings and Revenue Growth April 18th 2025

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So we recommend checking out this free report showing consensus forecasts

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Toronto-Dominion Bank, it has a TSR of 94% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Toronto-Dominion Bank shareholders have received returns of 12% over twelve months (even including dividends), which isn't far from the general market return. We should note here that the five-year TSR is more impressive, at 14% per year. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes Toronto-Dominion Bank a stock worth watching. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

Toronto-Dominion Bank is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.

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