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While Sopheon plc (LON:SPE) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 19% in the last quarter. But that doesn't displace its brilliant performance over three years. Indeed, the share price is up a whopping 1093% in that time. So the recent fall doesn't do much to dampen our respect for the business. The only way to form a view of whether the current price is justified is to consider the merits of the business itself.
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 three years of share price growth, Sopheon achieved compound earnings per share growth of 64% per year. In comparison, the 129% per year gain in the share price outpaces the EPS growth. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. That's not necessarily surprising considering the three-year track record of earnings growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It is of course excellent to see how Sopheon has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Sopheon stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Sopheon the TSR over the last 3 years was 1097%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that Sopheon shareholders have received a total shareholder return of 39% over the last year. That's including the dividend. However, the TSR over five years, coming in at 64% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. Before forming an opinion on Sopheon you might want to consider these 3 valuation metrics.
But note: Sopheon 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 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 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.