It might be of some concern to shareholders to see the First Derivatives plc (LON:FDP) share price down 18% in the last month. But that doesn't change the fact that the returns over the last five years have been pleasing. After all, the share price is up a market-beating 77% in that time.
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During five years of share price growth, First Derivatives actually saw its EPS drop 6.6% per year.
Essentially, it doesn't seem likely that investors are focused on EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
In contrast revenue growth of 17% per year is probably viewed as evidence that First Derivatives is growing, a real positive. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
This free interactive report on First Derivatives' balance sheet strength is a great place to start, if you want to investigate the stock further.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between First Derivatives' total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. First Derivatives' TSR of 82% for the 5 years exceeded its share price return, because it has paid dividends.
A Different Perspective
It's good to see that First Derivatives has rewarded shareholders with a total shareholder return of 12% in the last twelve months. However, the TSR over five years, coming in at 13% per year, is even more impressive. It's always interesting to track share price performance over the longer term. But to understand First Derivatives better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for First Derivatives you should be aware of.
But note: First Derivatives may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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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