Did The Underlying Business Drive Tekom Technologies’s (GTSM:6294) Lovely 335% Share Price Gain?

Long term investing can be life changing when you buy and hold the truly great businesses. And we’ve seen some truly amazing gains over the years. Don’t believe it? Then look at the Tekom Technologies, Inc (GTSM:6294) share price. It’s 335% higher than it was five years ago. And this is just one example of the epic gains achieved by some long term investors.

See our latest analysis for Tekom Technologies

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Over half a decade, Tekom Technologies managed to grow its earnings per share at 77% a year. This EPS growth is higher than the 34% average annual increase in the share price. So it seems the market isn’t so enthusiastic about the stock these days.

The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).

GTSM:6294 Past and Future Earnings, March 4th 2020
GTSM:6294 Past and Future Earnings, March 4th 2020

It might be well worthwhile taking a look at our free report on Tekom Technologies’s earnings, revenue and cash flow.

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 Tekom Technologies, it has a TSR of 441% 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

Tekom Technologies shareholders are down 0.7% for the year (even including dividends) , but the market itself is up 12%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn’t be so upset, since they would have made 40%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It’s always interesting to track share price performance over the longer term. But to understand Tekom Technologies better, we need to consider many other factors. Case in point: We’ve spotted 2 warning signs for Tekom Technologies you should be aware of.

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 TW exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.