When you buy shares in a company, there is always a risk that the price drops to zero. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the Luceco plc (LON:LUCE) share price has soared 133% in the last year. Most would be very happy with that, especially in just one year! It's also good to see the share price up 62% over the last quarter. The longer term returns have not been as good, with the stock price only 1.4% higher than it was three years ago.
Check out our latest analysis for Luceco
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...' 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.
Luceco was able to grow EPS by 61% in the last twelve months. This EPS growth is significantly lower than the 133% increase in the share price. So it's fair to assume the market has a higher opinion of the business than it a year ago.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Luceco has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Luceco, it has a TSR of 137% for the last year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that Luceco shareholders have gained 137% (in total) over the last year. That's including the dividend. So this year's TSR was actually better than the three-year TSR (annualized) of 1.5%. Given the track record of solid returns over varying time frames, it might be worth putting Luceco on your watchlist. 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. Even so, be aware that Luceco is showing 2 warning signs in our investment analysis , you should know about...
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 GB exchanges.
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. 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.
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