Chase Corporation (NYSEMKT:CCF) shareholders might be concerned after seeing the share price drop 14% in the last month. But that doesn’t change the fact that the returns over the last five years have been very strong. It’s fair to say most would be happy with 191% the gain in that time. So while it’s never fun to see a share price fall, it’s important to look at a longer time horizon. The more important question is whether the stock is too cheap or too expensive today.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During five years of share price growth, Chase achieved compound earnings per share (EPS) growth of 4.1% per year. This EPS growth is slower than the share price growth of 24% per year, over the same period. So it’s fair to assume the market has a higher opinion of the business than it did five years ago. That’s not necessarily surprising considering the five-year track record of earnings growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Dive deeper into Chase’s key metrics by checking this interactive graph of Chase’s earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Chase the TSR over the last 5 years was 205%, which is better than the share price return mentioned above. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Chase provided a TSR of 4.8% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 25% a year, over half a decade) look better. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. If you would like to research Chase in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
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