Investing in Celtic (LON:CCP) three years ago would have delivered you a 11% gain
You can receive the average market return by buying a low-cost index fund. But if you pick the right individual stocks, you could make more than that. To wit, Celtic plc (LON:CCP) shares are up 11% in three years, besting the market return. The stock price is up 2.0%: that's not amazing, but it's better than a kick in the teeth.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for Celtic
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
During the three years of share price growth, Celtic actually saw its earnings per share (EPS) drop 9.4% per year.
The strong decline in earnings per share suggests the market isn't using EPS to judge the company. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
It could be that the revenue growth of 12% per year is viewed as evidence that Celtic is growing. If the company is being managed for the long term good, today's shareholders might be right to hold on.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
Celtic shareholders gained a total return of 2.0% during the year. Unfortunately this falls short of the market return. But at least that's still a gain! Over five years the TSR has been a reduction of 0.5% per year, over five years. So this might be a sign the business has turned its fortunes around. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 2 warning signs for Celtic (1 can't be ignored) that you should be aware of.
Of course Celtic may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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