Yahoo Finance Is Instem's (LON:INS) Share Price Gain Of 193% Well Earned?
When you buy a stock there is always a possibility that it could drop 100%. But on a lighter note, a good company can see its share price rise well over 100%. Long term Instem plc (LON:INS) shareholders would be well aware of this, since the stock is up 193% in five years. It's also good to see the share price up 36% over the last quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.
View our latest analysis for Instem
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 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 the last half decade, Instem became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. Indeed, the Instem share price has gained 155% in three years. In the same period, EPS is up 45% per year. This EPS growth is higher than the 37% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days. Having said that, the market is still optimistic, given the P/E ratio of 55.49.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Instem has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Instem's financial health with this free report on its balance sheet.
A Different Perspective
It's good to see that Instem has rewarded shareholders with a total shareholder return of 52% in the last twelve months. That gain is better than the annual TSR over five years, which is 24%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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 2 warning signs for Instem you should be aware of.
We will like Instem better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
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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