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Imagine Holding Keywords Studios (LON:KWS) Shares While The Price Zoomed 843% Higher

Simply Wall St

It hasn't been the best quarter for Keywords Studios plc (LON:KWS) shareholders, since the share price has fallen 13% in that time. But that doesn't undermine the fantastic longer term performance (measured over five years). To be precise, the stock price is 843% higher than it was five years ago, a wonderful performance by any measure. So it might be that some shareholders are taking profits after good performance. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price.

We love happy stories like this one. The company should be really proud of that performance!

Check out our latest analysis for Keywords Studios

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).

During five years of share price growth, Keywords Studios achieved compound earnings per share (EPS) growth of 49% per year. So the EPS growth rate is rather close to the annualized share price gain of 57% per year. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price has approximately tracked EPS growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

AIM:KWS Past and Future Earnings, December 4th 2019
AIM:KWS Past and Future Earnings, December 4th 2019

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. We note that for Keywords Studios the TSR over the last 5 years was 856%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Keywords Studios shareholders have received returns of 8.7% over twelve months (even including dividends) , which isn't far from the general market return. It has to be noted that the recent return falls short of the 57% shareholders have gained each year, over half a decade. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes Keywords Studios a stock worth watching. If you would like to research Keywords Studios in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

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.

If you spot an error that warrants correction, please contact the editor at 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.