Can You Imagine How Elated Keywords Studios' (LON:KWS) Shareholders Feel About Its 758% Share Price Gain?

We think all investors should try to buy and hold high quality multi-year winners. While not every stock performs well, when investors win, they can win big. To wit, the Keywords Studios plc (LON:KWS) share price has soared 758% over five years. And this is just one example of the epic gains achieved by some long term investors. It's also up 11% in about a month.

It really delights us to see such great share price performance for investors.

View our latest analysis for Keywords Studios

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 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, Keywords Studios achieved compound earnings per share (EPS) growth of 34% per year. This EPS growth is slower than the share price growth of 54% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 107.18.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Keywords Studios' total shareholder return (TSR) and its share price change, which we've covered above. 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. Its history of dividend payouts mean that Keywords Studios' TSR of 762% over the last 5 years is better than the share price return.

A Different Perspective

We're pleased to report that Keywords Studios shareholders have received a total shareholder return of 50% over one year. Having said that, the five-year TSR of 54% a year, is even better. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Keywords Studios you should know about.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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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