Investing in Keywords Studios (LON:KWS) three years ago would have delivered you a 119% gain

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But in contrast you can make much more than 100% if the company does well. For example, the Keywords Studios plc (LON:KWS) share price has soared 118% in the last three years. How nice for those who held the stock! It's also good to see the share price up 25% over the last quarter.

So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.

Our analysis indicates that KWS is potentially overvalued!

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Keywords Studios was able to grow its EPS at 56% per year over three years, sending the share price higher. This EPS growth is higher than the 30% average annual increase in the share price. So it seems investors have become more cautious about the company, over time. Of course, with a P/E ratio of 57.43, the market remains optimistic.

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. This free interactive report on Keywords Studios' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's good to see that Keywords Studios has rewarded shareholders with a total shareholder return of 11% in the last twelve months. And that does include the dividend. However, the TSR over five years, coming in at 15% per year, is even more impressive. It's always interesting to track share price performance over the longer term. But to understand Keywords Studios better, we need to consider many other factors. Even so, be aware that Keywords Studios is showing 1 warning sign in our investment analysis , you should know about...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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. 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.