If You Had Bought Essex Bio-Technology (HKG:1061) Stock Five Years Ago, You Could Pocket A 40% Gain Today

Stock pickers are generally looking for stocks that will outperform the broader market. Buying under-rated businesses is one path to excess returns. To wit, the Essex Bio-Technology share price has climbed 40% in five years, easily topping the market return of 30% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 22% , including dividends .

See our latest analysis for Essex Bio-Technology

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. 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.

Over half a decade, Essex Bio-Technology managed to grow its earnings per share at 15% a year. The EPS growth is more impressive than the yearly share price gain of 7% over the same period. So one could conclude that the broader market has become more cautious towards the stock.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Dive deeper into Essex Bio-Technology's key metrics by checking this interactive graph of Essex Bio-Technology's earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

We've already covered Essex Bio-Technology's share price action, but we should also mention its 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. Its history of dividend payouts mean that Essex Bio-Technology's TSR of 47% over the last 5 years is better than the share price return.

A Different Perspective

Essex Bio-Technology provided a TSR of 22% over the last twelve months. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 8% per year over five year. It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand Essex Bio-Technology better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Essex Bio-Technology 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 HK 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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