Is PCC Exol's (WSE:PCX) 103% Share Price Increase Well Justified?

The last three months have been tough on PCC Exol S.A. (WSE:PCX) shareholders, who have seen the share price decline a rather worrying 49%. But that doesn't change the fact that the returns over the last year have been very strong. Like an eagle, the share price soared 103% in that time. So it is important to view the recent reduction in price through that lense. The real question is whether the business is trending in the right direction.

See our latest analysis for PCC Exol

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. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the last year PCC Exol grew its earnings per share (EPS) by 31%. This EPS growth is significantly lower than the 103% increase in the share price. This indicates that the market is now more optimistic about the stock.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into PCC Exol's key metrics by checking this interactive graph of PCC Exol's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, PCC Exol's TSR for the last year was 107%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that PCC Exol shareholders have received a total shareholder return of 107% over one year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 6% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with PCC Exol , and understanding them should be part of your investment process.

We will like PCC Exol 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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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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