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The main point of investing for the long term is to make money. But more than that, you probably want to see it rise more than the market average. Unfortunately for shareholders, while the London Security plc (LON:LSC) share price is up 11% in the last five years, that's less than the market return. Unfortunately the share price is down 2.1% in the last year.
Check out our latest analysis for London Security
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...' 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).
During five years of share price growth, London Security achieved compound earnings per share (EPS) growth of 4.2% per year. This EPS growth is higher than the 2% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into London Security's key metrics by checking this interactive graph of London Security's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of London Security, it has a TSR of 33% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
London Security shareholders are up 0.6% for the year (even including dividends). But that was short of the market average. If we look back over five years, the returns are even better, coming in at 6% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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 London Security that you should be aware of.
Of course London Security may not be the best stock to buy. So you may wish to see this free collection of growth stocks.