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Those who invested in Morgan Advanced Materials (LON:MGAM) a year ago are up 36%

Morgan Advanced Materials plc (LON:MGAM) shareholders have seen the share price descend 11% over the month. But that fact in itself shouldn't obscure what are quite decent returns over the last year. Indeed the stock is up 34% over twelve months, compared to a market return of about 30%.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

See our latest analysis for Morgan Advanced Materials

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

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Morgan Advanced Materials went from making a loss to reporting a profit, in the last year.

When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action.

We doubt the modest 2.0% dividend yield is doing much to support the share price. Unfortunately Morgan Advanced Materials' fell 11% over twelve months. So the fundamental metrics don't provide an obvious explanation for the share price gain.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
earnings-and-revenue-growth

Morgan Advanced Materials is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Morgan Advanced Materials in this interactive graph of future profit estimates.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Morgan Advanced Materials the TSR over the last 1 year was 36%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Morgan Advanced Materials shareholders have received a total shareholder return of 36% over the last year. And that does include the dividend. That's better than the annualised return of 8% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 3 warning signs for Morgan Advanced Materials that you should be aware of.

We will like Morgan Advanced Materials 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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.