Kid (OB:KID) stock performs better than its underlying earnings growth over last five years

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on a lighter note, a good company can see its share price rise well over 100%. One great example is Kid ASA (OB:KID) which saw its share price drive 146% higher over five years. It's also up 16% in about a month.

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

Check out our latest analysis for Kid

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.

During five years of share price growth, Kid achieved compound earnings per share (EPS) growth of 18% per year. So the EPS growth rate is rather close to the annualized share price gain of 20% per year. That suggests that the market sentiment around the company hasn't changed much over that time. Indeed, it would appear the share price is reacting to the EPS.

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

We know that Kid has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Kid the TSR over the last 5 years was 244%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Kid shareholders have received a total shareholder return of 24% over one year. Of course, that includes the dividend. However, the TSR over five years, coming in at 28% per year, is even more impressive. It's always interesting to track share price performance over the longer term. But to understand Kid better, we need to consider many other factors. For instance, we've identified 2 warning signs for Kid that you should be aware of.

We will like Kid better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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