Those who invested in Addtech AB (publ.) (STO:ADDT B) five years ago are up 335%

We think all investors should try to buy and hold high quality multi-year winners. While not every stock performs well, when investors win, they can win big. For example, the Addtech AB (publ.) (STO:ADDT B) share price is up a whopping 314% in the last half decade, a handsome return for long term holders. This just goes to show the value creation that some businesses can achieve.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for Addtech AB (publ.)

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Addtech AB (publ.) achieved compound earnings per share (EPS) growth of 17% per year. This EPS growth is lower than the 33% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth. This optimism is visible in its fairly high P/E ratio of 48.90.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Addtech AB (publ.)'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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Addtech AB (publ.), it has a TSR of 335% 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

We're pleased to report that Addtech AB (publ.) shareholders have received a total shareholder return of 47% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 34%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. To that end, you should be aware of the 1 warning sign we've spotted with Addtech AB (publ.) .

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.