Byggmax Group (STO:BMAX) jumps 12% this week, though earnings growth is still tracking behind three-year shareholder returns

By
Simply Wall St
Published
April 22, 2022
OM:BMAX
Source: Shutterstock

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Byggmax Group AB (publ) (STO:BMAX) share price has soared 103% in the last three years. Most would be happy with that. It's also up 17% in about a month. We note that Byggmax Group reported its financial results recently; luckily, you can catch up on the latest revenue and profit numbers in our company report.

Since the stock has added kr501m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Byggmax Group

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 three years of share price growth, Byggmax Group achieved compound earnings per share growth of 69% per year. This EPS growth is higher than the 27% average annual increase in the share price. So it seems investors have become more cautious about the company, over time. We'd venture the lowish P/E ratio of 7.55 also reflects the negative sentiment around the stock.

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

earnings-per-share-growth
OM:BMAX Earnings Per Share Growth April 22nd 2022

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Byggmax Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Byggmax Group's TSR for the last 3 years was 111%, 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

It's nice to see that Byggmax Group shareholders have received a total shareholder return of 14% 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 9% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Byggmax Group better, we need to consider many other factors. Take risks, for example - Byggmax Group has 2 warning signs (and 1 which is significant) we think you should know about.

Byggmax Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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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