Yellow Cake's (LON:YCA) 136% YoY earnings expansion surpassed the shareholder returns over the past year

By
Simply Wall St
Published
September 02, 2021
AIM:YCA
Source: Shutterstock

The simplest way to invest in stocks is to buy exchange traded funds. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Yellow Cake plc (LON:YCA) share price is 35% higher than it was a year ago, much better than the market return of around 25% (not including dividends) in the same period. So that should have shareholders smiling. The longer term returns have not been as good, with the stock price only 25% higher than it was three years ago.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

View our latest analysis for Yellow Cake

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...' 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 last year Yellow Cake grew its earnings per share (EPS) by 136%. This EPS growth is significantly higher than the 35% increase in the share price. So it seems like the market has cooled on Yellow Cake, despite the growth. Interesting. This cautious sentiment is reflected in its (fairly low) P/E ratio of 11.73.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

earnings-per-share-growth
AIM:YCA Earnings Per Share Growth September 3rd 2021

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on Yellow Cake's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

We're pleased to report that Yellow Cake rewarded shareholders with a total shareholder return of 35% over the last year. That's better than the annualized TSR of 8% over the last three years. These improved returns may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Yellow Cake better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Yellow Cake .

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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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