Investing in Seven West Media (ASX:SWM) a year ago would have delivered you a 113% gain
When you buy shares in a company, there is always a risk that the price drops to zero. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the Seven West Media Limited (ASX:SWM) share price had more than doubled in just one year - up 113%. Also pleasing for shareholders was the 53% gain in the last three months. However, the stock hasn't done so well in the longer term, with the stock only up 23% in three years.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
See our latest analysis for Seven West Media
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Seven West Media went from making a loss to reporting a profit, in the last year.
The result looks like a strong improvement to us, so we're not surprised the market likes the growth. Generally speaking the profitability inflection point is a great time to research a company closely, lest you miss an opportunity to profit.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on Seven West Media's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's nice to see that Seven West Media shareholders have received a total shareholder return of 113% over the last year. That certainly beats the loss of about 2% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Seven West Media better, we need to consider many other factors. For instance, we've identified 5 warning signs for Seven West Media (2 don't sit too well with us) that you should be aware of.
Seven West Media 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 AU 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.
