Stock Analysis

Introducing First Steamship (TPE:2601), A Stock That Climbed 17% In The Last Three Years

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TWSE:2601
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First Steamship Co., Ltd. (TPE:2601) shareholders might be concerned after seeing the share price drop 22% in the last month. In contrast the stock is up over the last three years. However, it's unlikely many shareholders are elated with the share price gain of 17% over that time, given the rising market.

Check out our latest analysis for First Steamship

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.

First Steamship was able to grow its EPS at 7.3% per year over three years, sending the share price higher. We note, however, that extraordinary items have impacted earnings. The average annual share price increase of 5% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
TSEC:2601 Earnings Per Share Growth February 1st 2021

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. In the case of First Steamship, it has a TSR of 23% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

First Steamship shareholders gained a total return of 6.2% during the year. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 4% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. 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. Take risks, for example - First Steamship has 2 warning signs we think you should be aware of.

We will like First Steamship better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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

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About TWSE:2601

First Steamship

First Steamship Co., Ltd. operates as a shipping company in Taiwan, China, and internationally.

Slightly overvalued with imperfect balance sheet.

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