The Total Shareholder Return Valuation Method: A Practical Framework for Long-Term Investors
Inside the TSR Method – with a downloadable spreadsheet and step-by-step video tutorial
If you’ve ever looked at a stock’s performance over the last 5, 10, or 20 years and wondered what exactly drove those returns – this post is for you.
Most investors stop at the surface: the chart went up, the business grew, maybe there were some dividends. But rarely do they break it down into the actual math of value creation. That’s where the Total Shareholder Return (TSR) framework comes in.
It gives you a structured way to deconstruct performance into its most essential drivers – and more importantly, it lets you flip the lens forward to estimate future returns using the same building blocks.
Whether you're evaluating a portfolio company, pitching an idea, or simply sanity-checking a stock you’re about to buy, this approach helps you go beyond narrative and price action and focus on the mechanics that actually create wealth.
I’ll be honest: this is one of the most practical and underrated tools I’ve come across in my years of investing. It’s simple in theory – but powerful in practice.
I originally published this framework as part of a my mentorship program curriculum, but in this blog post wanted to make it available for paying subscribers too so you can apply it immediately yourself.
This isn’t just another post to skim and forget. You’ll also get access to:
A downloadable valuation spreadsheet that lets you run the TSR model for any stock
A step-by-step video tutorial walking you through how the model works
A set of practical exercises so you can test the framework on companies you already own (or are thinking about buying)
If you’ve ever felt uncertain about what’s driving a stock’s return – or how to structure your thinking when projecting forward – this post will give you the clarity you’ve been missing.
What You’ll Learn Inside the Full Post:
A simple but challenging quiz to help you intuitively grasp how TSR works – and why most investors get it wrong
The actual formula for Total Shareholder Return, explained clearly and in detail
Breakdowns of all four TSR drivers: earnings growth, valuation changes, share buybacks (or dilution), and dividends
Why some drivers are easier to forecast than others – and how to spot mispriced sentiment
Six detailed examples, including Apple, Copart, a forward-looking case study, and a classic value trap
A deep dive on Apple’s 5,818% return between 2006–2022, broken down factor by factor
Key takeaways for analyzing future investments using the TSR lens
Access to the full spreadsheet and video walkthrough, so you can apply this to your own portfolio
The full deep dive is available to paying subscribers only. But if you’re on the fence, just know this: once you start thinking in terms of Total Shareholder Return, it fundamentally changes how you evaluate businesses. You start asking sharper questions. You focus on what actually matters. And you become a far more disciplined investor.
Part 1: Let’s Start with a Quiz
To kick things off, let me challenge you with a simple quiz. It’s designed to warm up your intuition around how TSR works – and trust me, even experienced investors occasionally get tripped up by this one.
Assume that between 1999 and 2024 (a 25-year period), Stock XYZ has delivered the following:
Earnings grew by a factor of 10.83x, or roughly 10% annually
The P/E ratio doubled from 10 to 20 (that’s a 2x increase, equivalent to ~2.8% compounded annually)
Now here’s the question:
What do you think the total return of this stock was over that 25-year period?
Take a moment to pause and think it through. Don’t scroll too quickly.
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Ready?