Those who invested in Element Solutions (NYSE: ESI) five years ago are up 221%
When you buy a stock, there is always a chance that it will drop by 100%. But on a lighter note, a good company can see its stock price rise by over 100%. For example, the Element Solutions Inc The stock price (NYSE: ESI) has climbed 217% in the past five years. Most would be very happy. We note that the share price has risen 1.2% in the past seven days.
So let’s assess the underlying fundamentals over the past 5 years and see if they have moved at the same pace as shareholder returns.
To paraphrase Benjamin Graham: In the short term the market is a voting machine, but in the long term it is a weighing machine. An imperfect but straightforward way to consider how a company’s market perception has changed is to compare the evolution of earnings per share (EPS) with the movement of the share price.
Over the five years of share price growth, Element Solutions has gone from loss to profitability. Sometimes the onset of profitability is a major inflection point that can signal rapid growth in future earnings, which in turn justifies very large price gains.
You can see below how the EPS has evolved over time (find out the exact values ââby clicking on the image).
NYSE: ESI Earnings Per Share Growth October 24, 2021
We are happy to report that the CEO is paid more modestly than most CEOs of companies with similar capitalization. But while CEO compensation is still worth checking out, the really important question is whether the company can increase profits in the future. It might be worth taking a look at our free Element Solutions earnings, revenue and cash flow report.
What about dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. While the share price return reflects only the change in the share price, the TSR includes the value of dividends (assuming they have been reinvested) and the benefit of any capital increase or spin- off updated. It’s fair to say that the TSR gives a more complete picture of dividend paying stocks. We note that for Element Solutions the TSR over the past 5 years was 221% which is better than the share price return mentioned above. The dividends paid by the company thus boosted the total shareholder return.
A different perspective
It is good to see that Element Solutions has rewarded its shareholders with a total shareholder return of 85% over the past twelve months. And that includes the dividend. As the 1-year TSR is better than the 5-year TSR (the latter standing at 26% per year), it seems that the stock’s performance has improved in recent times. At the best of times, this can portend real business momentum, meaning that now may be a good time to dig deeper. I find it very interesting to look at the long-term share price as an indicator of company performance. But to really get an overview, we have to take other information into account as well. For example, we have identified 1 warning sign for Element Solutions that you need to be aware of.
We will like Element Solutions better if we see big insider buys. In the meantime, watch this free list of growing companies with significant and recent insider buying.
Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently traded on US stock exchanges.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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