If you buy and hold a stock for many years, you'd hope to be making a profit. But more than that, you probably want to see it rise more than the market average. But Soft-World International Corporation (GTSM:5478) has fallen short of that second goal, with a share price rise of 45% over five years, which is below the market return. Over the last twelve months the stock price has risen a very respectable 18%.
Check out our latest analysis for Soft-World International
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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, Soft-World International managed to grow its earnings per share at 24% a year. The EPS growth is more impressive than the yearly share price gain of 8% over the same period. So it seems the market isn't so enthusiastic about the stock these days.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Soft-World International has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Soft-World International, it has a TSR of 68% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Soft-World International shareholders have received returns of 23% over twelve months (even including dividends), which isn't far from the general market return. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 11%. It is possible that management foresight will bring growth well into the future, even if the share price slows down. 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 for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Soft-World International , and understanding them should be part of your investment process.
But note: Soft-World International may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on TW exchanges.
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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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December 12, 2020 at 08:00AM
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Shareholders Of Soft-World International (GTSM:5478) Must Be Happy With Their 68% Return - Simply Wall St
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