U.S. markets open in 5 hours 42 minutes
  • S&P Futures

    4,266.00
    -10.75 (-0.25%)
     
  • Dow Futures

    33,899.00
    -64.00 (-0.19%)
     
  • Nasdaq Futures

    13,448.00
    -45.25 (-0.34%)
     
  • Russell 2000 Futures

    1,986.50
    -2.60 (-0.13%)
     
  • Crude Oil

    87.78
    -0.33 (-0.37%)
     
  • Gold

    1,775.20
    -1.50 (-0.08%)
     
  • Silver

    19.56
    -0.17 (-0.87%)
     
  • EUR/USD

    1.0163
    -0.0018 (-0.17%)
     
  • 10-Yr Bond

    2.8930
    0.0000 (0.00%)
     
  • Vix

    20.45
    +0.76 (+3.86%)
     
  • GBP/USD

    1.2023
    -0.0029 (-0.24%)
     
  • USD/JPY

    135.3240
    +0.2340 (+0.17%)
     
  • BTC-USD

    23,427.52
    -478.70 (-2.00%)
     
  • CMC Crypto 200

    557.20
    -15.62 (-2.73%)
     
  • FTSE 100

    7,502.22
    -13.53 (-0.18%)
     
  • Nikkei 225

    28,942.14
    -280.63 (-0.96%)
     

Sprott's (TSE:SII) five-year earnings growth trails the solid shareholder returns

  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

It hasn't been the best quarter for Sprott Inc. (TSE:SII) shareholders, since the share price has fallen 18% in that time. But that doesn't change the fact that shareholders have received really good returns over the last five years. In fact, the share price is 113% higher today. To some, the recent pullback wouldn't be surprising after such a fast rise. The more important question is whether the stock is too cheap or too expensive today.

Since it's been a strong week for Sprott shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for Sprott

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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 five years of share price growth, Sprott achieved compound earnings per share (EPS) growth of 3.8% per year. This EPS growth is lower than the 16% average annual increase in the share price. 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).

earnings-per-share-growth
earnings-per-share-growth

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Dive deeper into the earnings by checking this interactive graph of Sprott's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Sprott the TSR over the last 5 years was 155%, 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

It's nice to see that Sprott shareholders have received a total shareholder return of 8.1% over the last year. Of course, that includes the dividend. However, the TSR over five years, coming in at 21% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Sprott you should know about.

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 CA 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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here