Can You Imagine How Chuffed Knowit's (STO:KNOW) Shareholders Feel About Its 250% Share Price Gain?
It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But in contrast you can make much more than 100% if the company does well. For instance the Knowit AB (publ) (STO:KNOW) share price is 250% higher than it was three years ago. Most would be happy with that. Also pleasing for shareholders was the 25% gain in the last three months. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report.
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Check out our latest analysis for Knowit
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 three years of share price growth, Knowit achieved compound earnings per share growth of 41% per year. This EPS growth is lower than the 52% average annual increase in the share price. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It's not unusual to see the market 're-rate' a stock, after a few years of growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Knowit has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Knowit's financial health with this free report on its balance sheet.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for Knowit the TSR over the last 3 years was 280%, 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 good to see that Knowit has rewarded shareholders with a total shareholder return of 13% in the last twelve months. And that does include the dividend. However, that falls short of the 30% TSR per annum it has made for shareholders, each year, over five years. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. Before spending more time on Knowit it might be wise to click here to see if insiders have been buying or selling shares.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SE 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.
