Yahoo Finance Elders (ASX:ELD) Shareholders Received A Total Return Of 637% In The Last Five Years
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Elders Limited (ASX:ELD) shareholders might be concerned after seeing the share price drop 13% in the last quarter. But that doesn't undermine the fantastic longer term performance (measured over five years). In fact, during that period, the share price climbed 478%. Impressive! So we don't think the recent decline in the share price means its story is a sad one. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price.
Check out our latest analysis for Elders
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.
During the last half decade, Elders 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 Elders share price has gained 57% in three years. In the same period, EPS is up 14% per year. This EPS growth is reasonably close to the 16% average annual increase in the share price (over three years, again). That suggests that the market sentiment around the company hasn't changed much over that time. There's a strong correlation between the share price and EPS.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Elders's earnings, revenue and cash flow.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Elders the TSR over the last 5 years was 637%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Elders shareholders are down 17% for the year (even including dividends), but the market itself is up 11%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 49%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
Elders is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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.
