Addtech AB (publ.)'s (STO:ADDT B) five-year earnings growth trails the 32% YoY shareholder returns

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, you can make far more than 100% on a really good stock. One great example is Addtech AB (publ.) (STO:ADDT B) which saw its share price drive 281% higher over five years. Also pleasing for shareholders was the 11% gain in the last three months.

Since it's been a strong week for Addtech AB (publ.) shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for Addtech AB (publ.)

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 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, Addtech AB (publ.) achieved compound earnings per share (EPS) growth of 20% per year. This EPS growth is slower than the share price growth of 31% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. 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). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Addtech AB (publ.), it has a TSR of 305% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Addtech AB (publ.) shareholders have received returns of 17% over twelve months (even including dividends), which isn't far from the general market return. It has to be noted that the recent return falls short of the 32% shareholders have gained each year, over half a decade. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes Addtech AB (publ.) a stock worth watching. It's always interesting to track share price performance over the longer term. But to understand Addtech AB (publ.) better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Addtech AB (publ.) you should be aware of.

Addtech AB (publ.) is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com