Southern Cross Electrical Engineering (ASX:SXE) Has Compensated Shareholders With A Respectable 95% Return On Their Investment

When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. For example, long term Southern Cross Electrical Engineering Limited (ASX:SXE) shareholders have enjoyed a 58% share price rise over the last half decade, well in excess of the market return of around 36% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 1.9% , including dividends .

View our latest analysis for Southern Cross Electrical Engineering

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 the five years of share price growth, Southern Cross Electrical Engineering moved from a loss to profitability. That's generally thought to be a genuine positive, so we would expect to see an increasing share price.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Southern Cross Electrical Engineering has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

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. In the case of Southern Cross Electrical Engineering, it has a TSR of 95% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Southern Cross Electrical Engineering provided a TSR of 1.9% over the last twelve months. 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. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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. Even so, be aware that Southern Cross Electrical Engineering is showing 3 warning signs in our investment analysis , you should know about...

Of course Southern Cross Electrical Engineering may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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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