The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you pick the right stock, you can make a lot more than 100%. For example, the Piper Sandler Companies (NYSE:PIPR) share price has soared 229% return in just a single year. But it's down 5.4% in the last week. It is also impressive that the stock is up 31% over three years, adding to the sense that it is a real winner.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Over the last twelve months, Piper Sandler Companies actually shrank its EPS by 52%.
So we don't think that investors are paying too much attention to EPS. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.
However the year on year revenue growth of 48% would help. We do see some companies suppress earnings in order to accelerate revenue growth.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
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. You can see what analysts are predicting for Piper Sandler Companies in this interactive graph of future profit estimates.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Piper Sandler Companies the TSR over the last year was 240%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that Piper Sandler Companies shareholders have received a total shareholder return of 240% over one year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 22%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. For instance, we've identified 4 warning signs for Piper Sandler Companies that you should be aware of.
Piper Sandler Companies is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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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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. 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.
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