Better Collective (STO:BETCO) sheds 3.5% this week, as yearly returns fall more in line with earnings growth

Better Collective A/S (STO:BETCO) shareholders might be concerned after seeing the share price drop 15% in the last quarter. But that doesn't change the fact that the returns over the last five years have been very strong. Indeed, the share price is up an impressive 164% in that time. We think it's more important to dwell on the long term returns than the short term returns. Of course, that doesn't necessarily mean it's cheap now.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

View our latest analysis for Better Collective

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.

Over half a decade, Better Collective managed to grow its earnings per share at 14% a year. This EPS growth is slower than the share price growth of 21% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. 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 47.93.

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

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on Better Collective's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Better Collective shareholders gained a total return of 1.7% during the year. But that was short of the market average. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 21% over five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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. Even so, be aware that Better Collective is showing 2 warning signs in our investment analysis , you should know about...

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are 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