The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! Take, for example Sievi Capital Plc (HEL:SIEVI). Its share price is already up an impressive 129% in the last twelve months. On top of that, the share price is up 76% in about a quarter. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report. The longer term returns have not been as good, with the stock price only 10% higher than it was three years ago.
Since it's been a strong week for Sievi Capital shareholders, let's have a look at trend of the longer term fundamentals.
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 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.
Sievi Capital was able to grow EPS by 200% in the last twelve months. It's fair to say that the share price gain of 129% did not keep pace with the EPS growth. So it seems like the market has cooled on Sievi Capital, despite the growth. Interesting. This cautious sentiment is reflected in its (fairly low) P/E ratio of 6.29.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on Sievi Capital's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Sievi Capital, it has a TSR of 136% for the last 1 year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that Sievi Capital shareholders have received a total shareholder return of 136% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 19%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Sievi Capital (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.
We will like Sievi Capital better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on FI exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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