Kangaroo Island Plantation Timbers Limited (ASX:KPT) shareholders might be concerned after seeing the share price drop 15% in the last quarter. But that doesn’t change the fact that the returns over the last half decade have been spectacular. In that time, the share price has soared some 681% higher! So it might be that some shareholders are taking profits after good performance. Only time will tell if there is still too much optimism currently reflected in the share price.
We love happy stories like this one. The company should be really proud of that performance!
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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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the five years of share price growth, Kangaroo Island Plantation Timbers moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on Kangaroo Island Plantation Timbers’s earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We’d be remiss not to mention the difference between Kangaroo Island Plantation Timbers’s total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Kangaroo Island Plantation Timbers hasn’t been paying dividends, but its TSR of 739% exceeds its share price return of 681%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
Kangaroo Island Plantation Timbers shareholders are down 9.1% for the year, but the market itself is up 8.3%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn’t be so upset, since they would have made 53%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Thank you for reading.