Votum's (WSE:VOT) three-year earnings growth trails the incredible shareholder returns

By
Simply Wall St
Published
January 10, 2022
WSE:VOT
Source: Shutterstock

For us, stock picking is in large part the hunt for the truly magnificent stocks. Not every pick can be a winner, but when you pick the right stock, you can win big. For example, the Votum S.A. (WSE:VOT) share price is up a whopping 327% in the last three years, a handsome return for long term holders. Also pleasing for shareholders was the 30% gain in the last three months.

The past week has proven to be lucrative for Votum investors, so let's see if fundamentals drove the company's three-year performance.

View our latest analysis for Votum

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 three years of share price growth, Votum achieved compound earnings per share growth of 6.0% per year. This EPS growth is lower than the 62% average annual increase in the share price. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It's not unusual to see the market 're-rate' a stock, after a few years of growth.

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

earnings-per-share-growth
WSE:VOT Earnings Per Share Growth January 10th 2022

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

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. As it happens, Votum's TSR for the last 3 years was 347%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Votum has rewarded shareholders with a total shareholder return of 53% in the last twelve months. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 12% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Votum better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Votum you should be aware of.

We will like Votum better if we see some big insider buys. While we wait, check out this free list of growing companies 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 PL exchanges.

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