Investors in Kulicke and Soffa Industries (NASDAQ:KLIC) have made a splendid return of 160% over the past three years
The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But in contrast you can make much more than 100% if the company does well. For example, the Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) share price has soared 149% in the last three years. Most would be happy with that. On top of that, the share price is up 17% in about a quarter.
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.
See our latest analysis for Kulicke and Soffa Industries
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During three years of share price growth, Kulicke and Soffa Industries achieved compound earnings per share growth of 173% per year. The average annual share price increase of 36% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 9.37.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Kulicke and Soffa Industries has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Kulicke and Soffa Industries' balance sheet strength is a great place to start, if you want to investigate the stock further.
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Kulicke and Soffa Industries the TSR over the last 3 years was 160%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While it's certainly disappointing to see that Kulicke and Soffa Industries shares lost 5.7% throughout the year, that wasn't as bad as the market loss of 11%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 18% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. It's always interesting to track share price performance over the longer term. But to understand Kulicke and Soffa Industries better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Kulicke and Soffa Industries (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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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