Did You Participate In Any Of Central Securities' (NYSEMKT:CET) Fantastic 106% Return ?

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. But more than that, you probably want to see it rise more than the market average. But Central Securities Corp. (NYSEMKT:CET) has fallen short of that second goal, with a share price rise of 62% over five years, which is below the market return. But if you include dividends then the return is market-beating. The last year has been disappointing, with the stock price down 2.7% in that time.

View our latest analysis for Central Securities

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.

Central Securities has made a profit in the past. On the other hand, it reported a trailing twelve months loss, suggesting it isn't reliably profitable. So it might be better to look at other metrics to try to understand the share price.

We note that the dividend has not increased, so that doesn't seem to explain the increase, either. But it's reasonably likely that the 22% annual compound revenue growth is considered evidence that Central Securities has plenty of growth ahead of it. In that case, the company may be sacrificing current earnings per share to drive growth.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free interactive report on Central Securities' 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. 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. As it happens, Central Securities' TSR for the last 5 years was 106%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Central Securities shareholders gained a total return of 3.6% during the year. But that was short of the market average. On the bright side, the longer term returns (running at about 16% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for Central Securities you should be aware of.

Central Securities 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 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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