Yahoo Finance Investing in CSP (NASDAQ:CSPI) three years ago would have delivered you a 342% gain
Generally speaking, investors are inspired to be stock pickers by the potential to find the big winners. Not every pick can be a winner, but when you pick the right stock, you can win big. One bright shining star stock has been CSP Inc. (NASDAQ:CSPI), which is 334% higher than three years ago. It's also good to see the share price up 99% over the last quarter.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for CSP
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. 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 three years of share price growth, CSP achieved compound earnings per share growth of 157% per year. The average annual share price increase of 63% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for CSP the TSR over the last 3 years was 342%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's nice to see that CSP shareholders have received a total shareholder return of 168% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 27% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for CSP (1 is a bit unpleasant!) that you should be aware of before investing here.
CSP is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
