Yahoo Finance Investors in SEEK (ASX:SEK) have seen notable returns of 46% over the past five years
Stock pickers are generally looking for stocks that will outperform the broader market. And in our experience, buying the right stocks can give your wealth a significant boost. To wit, the SEEK share price has climbed 35% in five years, easily topping the market return of 24% (ignoring dividends).
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
See our latest analysis for SEEK
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
During the five years of share price growth, SEEK moved from a loss to profitability. That would generally be considered a positive, so we'd hope to see the share price to rise.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that SEEK has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, SEEK's TSR for the last 5 years was 46%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
While the broader market gained around 10% in the last year, SEEK shareholders lost 1.0% (even including dividends). 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. On the bright side, long term shareholders have made money, with a gain of 8% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. For instance, we've identified 3 warning signs for SEEK that you should be aware of.
Of course SEEK 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 Australian 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.
