Skellerup Holdings (NZSE:SKL) Has Rewarded Shareholders With An Exceptional 402% Total Return On Their Investment

By
Simply Wall St
Published
June 07, 2021
NZSE:SKL
Source: Shutterstock

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%. For instance, the price of Skellerup Holdings Limited (NZSE:SKL) stock is up an impressive 266% over the last five years.

See our latest analysis for Skellerup Holdings

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, Skellerup Holdings achieved compound earnings per share (EPS) growth of 11% per year. This EPS growth is lower than the 30% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

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
NZSE:SKL Earnings Per Share Growth June 7th 2021

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Skellerup Holdings' earnings, revenue and cash flow.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Skellerup Holdings, it has a TSR of 402% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Skellerup Holdings shareholders have received a total shareholder return of 133% over the last year. Of course, that includes the dividend. That's better than the annualised return of 38% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Skellerup Holdings better, we need to consider many other factors. Even so, be aware that Skellerup Holdings is showing 2 warning signs 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 NZ exchanges.

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