Smith-Midland's (NASDAQ:SMID) five-year earnings growth trails the 56% YoY shareholder returns
Buying shares in the best businesses can build meaningful wealth for you and your family. While the best companies are hard to find, but they can generate massive returns over long periods. To wit, the Smith-Midland Corporation (NASDAQ:SMID) share price has soared 799% over five years. If that doesn't get you thinking about long term investing, we don't know what will. On top of that, the share price is up 253% in about a quarter. We love happy stories like this one. The company should be really proud of that performance!
Since the stock has added US$35m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
See our latest analysis for Smith-Midland
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, Smith-Midland achieved compound earnings per share (EPS) growth of 29% per year. This EPS growth is slower than the share price growth of 55% 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. That's not necessarily surprising considering the five-year track record of earnings growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on Smith-Midland's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What about the Total Shareholder Return (TSR)?
We've already covered Smith-Midland's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Smith-Midland's TSR of 821% over the last 5 years is better than the share price return.
A Different Perspective
It's nice to see that Smith-Midland shareholders have received a total shareholder return of 415% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 56% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Smith-Midland better, we need to consider many other factors. For example, we've discovered 2 warning signs for Smith-Midland that you should be aware of before investing here.
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.
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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.
