Investors in Transurban Group (ASX:TCL) have seen notable returns of 34% over the past five years

Simply Wall St · 04/18 20:27

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you'd generally like to see the share price rise faster than the market. But Transurban Group (ASX:TCL) has fallen short of that second goal, with a share price rise of 11% over five years, which is below the market return. Looking at the last year alone, the stock is up 8.7%.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

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We don't think that Transurban Group's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last 5 years Transurban Group saw its revenue grow at 7.0% per year. That's a fairly respectable growth rate. The annual gain of 2% over five years is better than nothing, but falls short of the market. You could even argue that the share price was over optimistic, previously.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth
ASX:TCL Earnings and Revenue Growth April 18th 2025

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. If you are thinking of buying or selling Transurban Group stock, you should check out this free report showing analyst profit forecasts.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. We note that for Transurban Group the TSR over the last 5 years was 34%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Transurban Group has rewarded shareholders with a total shareholder return of 14% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 6% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Transurban Group better, we need to consider many other factors. For example, we've discovered 3 warning signs for Transurban Group (2 are potentially serious!) that you should be aware of before investing here.

We will like Transurban Group better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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

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