Did You Participate In Any Of Kip McGrath Education Centres' (ASX:KME) Incredible 358% Return?

When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. For instance, the price of Kip McGrath Education Centres Limited (ASX:KME) stock is up an impressive 270% over the last five years. And in the last month, the share price has gained -3.3%.

View our latest analysis for Kip McGrath Education Centres

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, Kip McGrath Education Centres managed to grow its earnings per share at 7.2% a year. This EPS growth is slower than the share price growth of 30% 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. And that's hardly shocking given the track record of growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Kip McGrath Education Centres' 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. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Kip McGrath Education Centres' TSR for the last 5 years was 358%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Kip McGrath Education Centres shareholders gained a total return of 1.4% during the year. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 36% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand Kip McGrath Education Centres better, we need to consider many other factors. Case in point: We've spotted 5 warning signs for Kip McGrath Education Centres you should be aware of, and 1 of them is a bit concerning.

Kip McGrath Education Centres is not the only stock insiders are buying. So take a peek at this free 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 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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