U.S. Markets open in 3 hrs 33 mins

Did The Underlying Business Drive Soitec's (EPA:SOI) Lovely 426% Share Price Gain?

Simply Wall St

Generally speaking, investors are inspired to be stock pickers by the potential to find the big winners. But when you hold the right stock for the right time period, the rewards can be truly huge. One such superstar is Soitec S.A. (EPA:SOI), which saw its share price soar 426% in three years.

Check out our latest analysis for Soitec

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.

Soitec became profitable within the last three years. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

ENXTPA:SOI Past and Future Earnings, October 2nd 2019

It is of course excellent to see how Soitec has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Soitec's total shareholder return (TSR) and its share price return. 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. Soitec hasn't been paying dividends, but its TSR of 426% exceeds its share price return of 426%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

We're pleased to report that Soitec shareholders have received a total shareholder return of 44% over one year. That gain is better than the annual TSR over five years, which is 22%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Is Soitec cheap compared to other companies? These 3 valuation measures might help you decide.

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 FR 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.