Those who invested in Sectra (STO:SECT B) five years ago are up 573%

By
Simply Wall St
Published
September 26, 2021
OM:SECT B
Source: Shutterstock

For many, the main point of investing in the stock market is to achieve spectacular returns. And we've seen some truly amazing gains over the years. For example, the Sectra AB (publ) (STO:SECT B) share price is up a whopping 573% 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. It's also good to see the share price up 49% over the last quarter. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report. We love happy stories like this one. The company should be really proud of that performance!

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

Check out our latest analysis for Sectra

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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, Sectra achieved compound earnings per share (EPS) growth of 21% per year. This EPS growth is slower than the share price growth of 46% per year, over the same period. 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 favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 112.45.

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
OM:SECT B Earnings Per Share Growth September 27th 2021

We know that Sectra has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

A Different Perspective

It's nice to see that Sectra shareholders have received a total shareholder return of 70% over the last year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 46% per year), it would seem that the stock's performance has improved in recent times. 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 Sectra better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Sectra (of which 1 is significant!) you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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

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