When we invest, we’re generally looking for stocks that outperform the market average. And in our experience, buying the right stocks can give your wealth a significant boost. For example, long term Spectris plc (LON:SXS) shareholders have enjoyed a 49% share price rise over the last half decade, well in excess of the market decline of around 2.7% (not including dividends). However, more recent returns haven’t been as impressive as that, with the stock returning just 5.4% in the last year , including dividends .
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ 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).
Over half a decade, Spectris managed to grow its earnings per share at 11% a year. This EPS growth is higher than the 8.3% average annual increase in the share price. So it seems the market isn’t so enthusiastic about the stock these days.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Spectris has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
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 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Spectris’ TSR for the last 5 years was 68%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
We’re pleased to report that Spectris shareholders have received a total shareholder return of 5.4% over one year. Of course, that includes the dividend. Having said that, the five-year TSR of 11% a year, is even better. Potential buyers might understandably feel they’ve missed the opportunity, but it’s always possible business is still firing on all cylinders. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we’ve discovered 1 warning sign for Spectris that you should be aware of before investing here.
We will like Spectris better if we see some big insider buys. While we wait, check out this free list of growing companies 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 GB exchanges.
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This article by Simply Wall St is general in nature. 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.
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