If you want to compound wealth in the stock market, you can do so by buying an index fund. But investors can boost returns by picking market-beating companies to own shares in. For example, the Koppers Holdings Inc. (NYSE:KOP) share price is up 35% in the last 1 year, clearly besting the market return of around 27% (not including dividends). That's a solid performance by our standards! However, the longer term returns haven't been so impressive, with the stock up just 8.7% in the last three years.
So let's assess the underlying fundamentals over the last 1 year and see if they've moved in lock-step with shareholder returns.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 the last year Koppers Holdings grew its earnings per share (EPS) by 51%. It's fair to say that the share price gain of 35% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about Koppers Holdings as it was before. This could be an opportunity. The caution is also evident in the lowish P/E ratio of 6.49.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It is of course excellent to see how Koppers Holdings has grown profits over the years, but the future is more important for shareholders. This free interactive report on Koppers Holdings' balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
We're pleased to report that Koppers Holdings shareholders have received a total shareholder return of 35% over one year. Notably the five-year annualised TSR loss of 0.4% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand Koppers Holdings better, we need to consider many other factors. Take risks, for example - Koppers Holdings has 1 warning sign we think you should be aware of.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
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