Yahoo Finance Smiths News (LON:SNWS) shareholder returns have been notable, earning 77% in 5 years
When we invest, we're generally looking for stocks that outperform the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. To wit, the Smiths News share price has climbed 40% in five years, easily topping the market return of 0.1% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 10% in the last year , including dividends .
Since the stock has added UK£12m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
See our latest analysis for Smiths News
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the five years of share price growth, Smiths News moved from a loss to profitability. That would generally be considered a positive, so we'd hope to see the share price to rise. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. We can see that the Smiths News share price is up 37% in the last three years. In the same period, EPS is up 29% per year. This EPS growth is higher than the 11% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat. This cautious sentiment is reflected in its (fairly low) P/E ratio of 5.08.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
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). 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, Smiths News' TSR for the last 5 years was 77%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that Smiths News shareholders have received a total shareholder return of 10% over one year. Of course, that includes the dividend. However, the TSR over five years, coming in at 12% per year, is even more impressive. It's always interesting to track share price performance over the longer term. But to understand Smiths News better, we need to consider many other factors. To that end, you should learn about the 4 warning signs we've spotted with Smiths News (including 1 which doesn't sit too well with us) .
Of course Smiths News may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British 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.
