SMCP's (EPA:SMCP) three-year total shareholder returns outpace the underlying earnings growth

It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But if you buy shares in a really great company, you can more than double your money. For example, the SMCP S.A. (EPA:SMCP) share price has soared 159% in the last three years. Most would be happy with that. It's also good to see the share price up 28% over the last 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.

Although SMCP has shed €50m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

View our latest analysis for SMCP

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

During three years of share price growth, SMCP achieved compound earnings per share growth of 4.4% per year. In comparison, the 37% per year gain in the share price outpaces the EPS growth. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It's not unusual to see the market 're-rate' a stock, after a few years of growth.

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

We know that SMCP has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

A Different Perspective

We're pleased to report that SMCP shareholders have received a total shareholder return of 14% over one year. Notably the five-year annualised TSR loss of 10% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. Before forming an opinion on SMCP you might want to consider these 3 valuation metrics.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on French 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.