Yahoo Finance Introducing Amplifon (BIT:AMP), The Stock That Soared 390% In The Last Five Years
We think all investors should try to buy and hold high quality multi-year winners. While the best companies are hard to find, but they can generate massive returns over long periods. Don't believe it? Then look at the Amplifon SpA (BIT:AMP) share price. It's 390% higher than it was five years ago. This just goes to show the value creation that some businesses can achieve. Then again, the 9.4% share price decline hasn't been so fun for shareholders. This could be related to the soft market, with stocks down around 0.6% in the last month.
View our latest analysis for Amplifon
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 five years of share price growth, Amplifon achieved compound earnings per share (EPS) growth of 28% per year. This EPS growth is lower than the 37% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
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. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Amplifon's TSR for the last 5 years was 406%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We're pleased to report that Amplifon shareholders have received a total shareholder return of 19% over one year. That's including the dividend. However, the TSR over five years, coming in at 38% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. Before deciding if you like the current share price, check how Amplifon scores on these 3 valuation metrics.
We will like Amplifon 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 IT exchanges.
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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Thank you for reading.
