Shareholders of Judges Scientific (LON:JDG) Must Be Delighted With Their 354% Total Return

Long term investing can be life changing when you buy and hold the truly great businesses. And we've seen some truly amazing gains over the years. For example, the Judges Scientific plc (LON:JDG) share price is up a whopping 308% in the last half decade, a handsome return for long term holders. This just goes to show the value creation that some businesses can achieve. Also pleasing for shareholders was the 20% gain in the last three months. But this move may well have been assisted by the reasonably buoyant market (up 12% in 90 days).

Check out our latest analysis for Judges Scientific

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 last half decade, Judges Scientific became profitable. 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. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. Indeed, the Judges Scientific share price has gained 209% in three years. In the same period, EPS is up 54% per year. That makes the EPS growth rather close to the annualized share price gain of 46% over the same period. So you could reasonably conclude that investor sentiment towards the stock has remained pretty steady, over time. Rather, the share price has approximately tracked EPS growth.

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. Dive deeper into the earnings by checking this interactive graph of Judges Scientific's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Judges Scientific, it has a TSR of 354% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Judges Scientific has rewarded shareholders with a total shareholder return of 20% in the last twelve months. Of course, that includes the dividend. However, that falls short of the 35% TSR per annum it has made for shareholders, each year, over five years. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. It's always interesting to track share price performance over the longer term. But to understand Judges Scientific better, we need to consider many other factors. For example, we've discovered 2 warning signs for Judges Scientific that you should be aware of before investing here.

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 GB 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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