The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share price rise faster than the market Unfortunately for shareholders, while the Knoll, Inc. (NYSE:KNL) share price is up 41% in the last five years, that's less than the market return. The last year hasn't been great either, with the stock up just 4.1%.
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, Knoll achieved compound earnings per share (EPS) growth of 24% per year. This EPS growth is higher than the 7.0% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Knoll's key metrics by checking this interactive graph of Knoll's earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, Knoll's TSR for the last 5 years was 61%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We're pleased to report that Knoll shareholders have received a total shareholder return of 7.3% over one year. That's including the dividend. However, that falls short of the 10.0% TSR per annum it has made for shareholders, each year, over five years. If you would like to research Knoll in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
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 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 email@example.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.