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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, you can make far more than 100% on a really good stock. For example, the Simpson Manufacturing Co., Inc. (NYSE:SSD) share price has soared 135% in the last half decade. Most would be very happy with that. The last week saw the share price soften some 1.8%.
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 Simpson Manufacturing
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 five years of share price growth, Simpson Manufacturing achieved compound earnings per share (EPS) growth of 24% per year. This EPS growth is higher than the 19% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Simpson Manufacturing's key metrics by checking this interactive graph of Simpson Manufacturing'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). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Simpson Manufacturing's TSR for the last 5 years was 146%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Simpson Manufacturing shareholders gained a total return of 2.2% during the year. But that return falls short of the market. On the bright side, the longer term returns (running at about 20% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. Before spending more time on Simpson Manufacturing it might be wise to click here to see if insiders have been buying or selling shares.