Shareholders of Kip McGrath Education Centres (ASX:KME) Must Be Delighted With Their 422% Total Return
While Kip McGrath Education Centres Limited (ASX:KME) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 14% in the last quarter. But that doesn't undermine the fantastic longer term performance (measured over five years). To be precise, the stock price is 325% higher than it was five years ago, a wonderful performance by any measure. Arguably, the recent fall is to be expected after such a strong rise. The most important thing for savvy investors to consider is whether the underlying business can justify the share price gain.
See our latest analysis for Kip McGrath Education Centres
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
Over half a decade, Kip McGrath Education Centres managed to grow its earnings per share at 8.5% a year. This EPS growth is slower than the share price growth of 34% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 46.03.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Kip McGrath Education Centres' earnings, revenue and cash flow.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Kip McGrath Education Centres' TSR for the last 5 years was 422%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Kip McGrath Education Centres has rewarded shareholders with a total shareholder return of 36% in the last twelve months. Of course, that includes the dividend. However, the TSR over five years, coming in at 39% per year, is even more impressive. It's always interesting to track share price performance over the longer term. But to understand Kip McGrath Education Centres better, we need to consider many other factors. To that end, you should be aware of the 5 warning signs we've spotted with Kip McGrath Education Centres .
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 AU exchanges.
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. 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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