Buying stocks in the best companies can create significant wealth for you and your family. Sure, the best companies are hard to find, but they can generate massive returns over long periods of time. Namely, the Umanis SA (EPA: ALUMS) The share price has climbed 649% in five years. It just shows the value creation that some companies can achieve. It is also good to see the stock price increase by 57% in the last quarter. We love happy stories like this. The company should be really proud of this performance!
As it has been a strong week for Umanis shareholders, let’s take a look at longer term fundamentals.
See our latest review for Umanis
In his essay Graham-and-Doddsville super-investors Warren Buffett described how stock prices don’t always rationally reflect a company’s value. A flawed but reasonable way to gauge how sentiment is changing around a company is to compare earnings per share (EPS) with the stock price.
Over the five years of share price growth, Umanis has achieved compound earnings per share (EPS) growth of 37% per year. This EPS growth is lower than the 50% average annual increase in the share price. This suggests that market participants hold society in the highest regard these days. This isn’t necessarily surprising given the track record of five-year earnings growth.
The image below shows how EPS has tracked over time (if you click on the image you can see more detail).
We know Umanis has improved its results lately, but will it increase its revenue? This free A report showing analysts’ revenue forecasts should help you determine if EPS growth can be sustained.
What about the Total Shareholder Return (TSR)?
We have already covered the evolution of Umanis’ share price, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any impact or discounted capital increases offered to shareholders. Its dividend payout history means that Umanis’ TSR of 668% over the past 5 years is better than the stock price return.
A different perspective
It is nice to see that Umanis shareholders have received a total shareholder return of 153% over the past year. This gain is better than the annual TSR over five years, which is 50%. Therefore, it seems that sentiment around the company has been positive lately. At the best of times, this can portend real business momentum, meaning that now may be a good time to dig deep. It is always interesting to follow the evolution of stock prices over the long term. But to better understand Umanis, there are many other factors that we need to take into account. Consider, for example, the ever-present specter of investment risk. We have identified 2 warning signs with Umanis, and understanding them should be part of your investment process.
If you would rather consult with another company – one with potentially superior finances – then don’t miss this free list of companies that have proven they can increase their profits.
Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently traded on FR stock exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St does not have any position in the mentioned stocks.
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