Yahoo Finance Clarkson's (LON:CKN) 12% CAGR outpaced the company's earnings growth over the same three-year period
By buying an index fund, investors can approximate the average market return. But if you choose individual stocks with prowess, you can make superior returns. For example, the Clarkson PLC (LON:CKN) share price is up 30% in the last three years, clearly besting the market return of around 4.0% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 4.0% , including dividends .
On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.
See our latest analysis for Clarkson
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 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.
During three years of share price growth, Clarkson moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Clarkson's TSR for the last 3 years was 41%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Clarkson provided a TSR of 4.0% over the last twelve months. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 3% over half a decade It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand Clarkson better, we need to consider many other factors. Take risks, for example - Clarkson has 2 warning signs (and 1 which is a bit concerning) we think you should know about.
Clarkson 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 GB exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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