Yahoo Finance Knights Group Holdings' (LON:KGH) investors will be pleased with their notable 94% return over the last year
These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Knights Group Holdings plc (LON:KGH) share price is 87% higher than it was a year ago, much better than the market return of around 3.6% (not including dividends) in the same period. So that should have shareholders smiling. Zooming out, the stock is actually down 71% in the last three years.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
Check out our latest analysis for Knights Group Holdings
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Knights Group Holdings was able to grow EPS by 347% in the last twelve months. It's fair to say that the share price gain of 87% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about Knights Group Holdings as it was before. This could be an opportunity. The caution is also evident in the lowish P/E ratio of 11.21.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how Knights Group Holdings has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Knights Group Holdings' TSR for the last 1 year was 94%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's nice to see that Knights Group Holdings shareholders have received a total shareholder return of 94% over the last year. And that does include the dividend. There's no doubt those recent returns are much better than the TSR loss of 9% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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. Take risks, for example - Knights Group Holdings has 2 warning signs we think you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British exchanges.
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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.
