Yahoo Finance Does Magellan Aerospace's (TSE:MAL) Share Price Gain of 96% Match Its Business Performance?
Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
When we invest, we're generally looking for stocks that outperform the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. To wit, the Magellan Aerospace share price has climbed 96% in five years, easily topping the market return of 5.6% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 0.4% in the last year, including dividends.
See our latest analysis for Magellan Aerospace
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
During five years of share price growth, Magellan Aerospace achieved compound earnings per share (EPS) growth of 14% per year. This EPS growth is remarkably close to the 14% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Indeed, it would appear the share price is reacting to the EPS.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Magellan Aerospace'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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Magellan Aerospace the TSR over the last 5 years was 113%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Magellan Aerospace provided a TSR of 0.4% over the last twelve months. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 16% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. Before spending more time on Magellan Aerospace it might be wise to click here to see if insiders have been buying or selling shares.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
