It hasn't been the best quarter for EVI Industries, Inc. (NYSEMKT:EVI) shareholders, since the share price has fallen 11% in that time. But that doesn't undermine the fantastic longer term performance (measured over five years). In fact, during that period, the share price climbed 1182%. Impressive! So we don't think the recent decline in the share price means its story is a sad one. Only time will tell if there is still too much optimism currently reflected in the share price. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 16% decline over the last twelve months.
It really delights us to see such great share price performance for investors.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 five years of share price growth, EVI Industries achieved compound earnings per share (EPS) growth of 5.6% per year. This EPS growth is lower than the 67% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth. This optimism is visible in its fairly high P/E ratio of 105.69.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, EVI Industries's TSR for the last 5 years was 1381%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
EVI Industries shareholders are down 15% for the year (even including dividends) , but the market itself is up 2.5%. 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 71%, 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. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
But note: EVI Industries may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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 firstname.lastname@example.org. 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.