It is doubtless a positive to see that the The L.S. Starrett Company (NYSE:SCX) share price has gained some 36% in the last three months. But over the last half decade, the stock has not performed well. You would have done a lot better buying an index fund, since the stock has dropped 55% in that half decade.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During five years of share price growth, L.S. Starrett moved from a loss to profitability. Most would consider that to be a good thing, so it’s counter-intuitive to see the share price declining. Other metrics may better explain the share price move.
Arguably, the revenue drop of 4.0% a year for half a decade suggests that the company can’t grow in the long term. This has probably encouraged some shareholders to sell down the stock.
Depicted in the graphic below, you’ll see revenue and earnings over time. If you want more detail, you can click on the chart itself.
Balance sheet strength is crucual. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Dividend Lost
The share price return figures discussed above don’t include the value of dividends paid previously, but the total shareholder return (TSR) does. Many would argue the TSR gives a more complete picture of the value a stock brings to its holders. Over the last 5 years, L.S. Starrett generated a TSR of -49%, which is, of course, better than the share price return. Even though the company isn’t paying dividends at the moment, it has done in the past.
A Different Perspective
It’s nice to see that L.S. Starrett shareholders have received a total shareholder return of 21% over the last year. That certainly beats the loss of about 13% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. Before spending more time on L.S. Starrett it might be wise to click here to see if insiders have been buying or selling shares.
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 US exchanges.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.