Monadelphous Group Limited (ASX:MND) shareholders might be concerned after seeing the share price drop 19% in the last quarter. But at least the stock is up over the last five years. However we are not very impressed because the share price is only up 56%, less than the market return of 66%.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).
During five years of share price growth, Monadelphous Group actually saw its EPS drop 14% per year.
Essentially, it doesn't seem likely that investors are focused on EPS. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.
The revenue growth of 2.5% per year hardly seems impressive. So it seems one might have to take closer look at earnings and revenue trends to see how they might influence the share price.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Monadelphous Group is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Monadelphous Group stock, you should check out this free report showing analyst consensus estimates for future profits.
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 Monadelphous Group the TSR over the last 5 years was 89%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Monadelphous Group shareholders gained a total return of 2.9% during the year. But that was short of the market average. On the bright side, the longer term returns (running at about 14% 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. It's always interesting to track share price performance over the longer term. But to understand Monadelphous Group better, we need to consider many other factors. For instance, we've identified 2 warning signs for Monadelphous Group that you should be aware of.
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 AU 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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