Seamec (NSE:SEAMECLTD) stock performs better than its underlying earnings growth over last five years

By
Simply Wall St
Published
August 18, 2021
NSEI:SEAMECLTD
Source: Shutterstock

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. Just think about the savvy investors who held Seamec Limited (NSE:SEAMECLTD) shares for the last five years, while they gained 686%. And this is just one example of the epic gains achieved by some long term investors. On top of that, the share price is up 83% in about a quarter. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report. We love happy stories like this one. The company should be really proud of that performance!

Since it's been a strong week for Seamec shareholders, let's have a look at trend of the longer term fundamentals.

See our latest analysis for Seamec

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

During five years of share price growth, Seamec achieved compound earnings per share (EPS) growth of 92% per year. This EPS growth is higher than the 51% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

earnings-per-share-growth
NSEI:SEAMECLTD Earnings Per Share Growth August 19th 2021

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Seamec the TSR over the last 5 years was 689%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Seamec shareholders have received a total shareholder return of 80% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 51%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. For example, we've discovered 2 warning signs for Seamec that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN exchanges.

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