Ferrexpo (LON:FXPO) Shareholders Have Enjoyed A Whopping 740% Share Price Gain
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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 bright shining star stock has been Ferrexpo Plc (LON:FXPO), which is 740% higher than three years ago. In more good news, the share price has risen 3.5% in thirty days.
It really delights us to see such great share price performance for investors.
View our latest analysis for Ferrexpo
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 three years of share price growth, Ferrexpo achieved compound earnings per share growth of 116% per year. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 103% average annual increase in the share price. This observation indicates that the market's attitude to the business hasn't changed all that much. Quite to the contrary, the share price has arguably reflected the EPS growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. 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. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Ferrexpo the TSR over the last 3 years was 893%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's nice to see that Ferrexpo shareholders have received a total shareholder return of 61% over the last year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 22% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before spending more time on Ferrexpo it might be wise to click here to see if insiders have been buying or selling shares.
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.
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.
