When buying shares in a company, it's worth bearing in mind that the company could fail and you could lose money. However, on a lighter note, a good company can have its stock price rise well over 100%. For example, prices such as: Excelsior Capital Limited (ASX:ECL) share price is up an impressive 139% over the past five years. Meanwhile, the stock price is up 1.6% from a week ago.
So let's assess the underlying fundamentals over the past five years to see if they have kept pace with shareholder returns.
Check out our latest analysis for Excelsior Capital.
Markets are powerful pricing mechanisms, but stock prices reflect not only underlying business performance but also investor sentiment. One way he looks at how market sentiment has changed over time is to look at the interaction between a company's stock price and his earnings per share (EPS).
Excelsior Capital achieved compound earnings per share (EPS) growth of 22% per year during the five-year share price period. This EPS growth is quite close to the average annual increase in the stock price of 19%. Therefore, we can conclude that sentiment towards the stock hasn't changed much. In fact, stock prices seem to largely reflect EPS growth.
The image below shows how EPS has changed over time (unveil the exact values by clicking on the image).
We like to see that insiders have made significant purchases in the last year. Even so, future profits will be far more important than whether current shareholders make money. Before buying or selling a stock, it's always a good idea to take a closer look at past growth trends. You can get it here.
What will happen to the dividend?
As well as measuring share price return, investors should also consider total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return delivered by a stock. For Excelsior Capital, the TSR for the last 5 years is 175%. This exceeds the stock return mentioned earlier. This is primarily due to dividend payments.
different perspective
It's good to see that Excelsior Capital returned a total return of 20% to shareholders in the over the last twelve months. That includes dividends. However, this falls short of the 22% annual TSR that the company has provided shareholders each year over five years. I think it's very interesting to look at stock price over the long term as an indicator of business performance. But to really gain insight, you need to consider other information as well. For example, we identified 1 warning sign for Excelsior Capital What you need to know.
Excelsior Capital isn't the only company with insiders buying stock.So take a look at this free A list of growing companies with 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
