Yahoo Finance The total return for Enghouse Systems (TSE:ENGH) investors has risen faster than earnings growth over the last five years
It hasn't been the best quarter for Enghouse Systems Limited (TSE:ENGH) shareholders, since the share price has fallen 19% in that time. On the bright side the returns have been quite good over the last half decade. After all, the share price is up a market-beating 72% in that time. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 30% decline over the last twelve months.
While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.
See our latest analysis for Enghouse Systems
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).
Over half a decade, Enghouse Systems managed to grow its earnings per share at 14% a year. This EPS growth is reasonably close to the 11% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. In fact, the share price seems to largely reflect the EPS growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Enghouse Systems' earnings, revenue and cash flow.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Enghouse Systems, it has a TSR of 85% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Enghouse Systems shareholders are down 29% for the year (even including dividends), but the market itself is up 19%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 13%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. For instance, we've identified 1 warning sign for Enghouse Systems that you should be aware of.
Enghouse Systems 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 CA 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.
