It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But when you pick a company that is really flourishing, you can make more than 100%. To wit, the Lindsay Australia Limited (ASX:LAU) share price has flown 260% in the last three years. Most would be happy with that. Better yet, the share price has risen 8.3% in the last week.
So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.
View our latest analysis for Lindsay Australia
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During three years of share price growth, Lindsay Australia achieved compound earnings per share growth of 84% per year. The average annual share price increase of 53% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat. This cautious sentiment is reflected in its (fairly low) P/E ratio of 10.56.
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. Dive deeper into the earnings by checking this interactive graph of Lindsay Australia's earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Lindsay Australia's TSR for the last 3 years was 321%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We're pleased to report that Lindsay Australia shareholders have received a total shareholder return of 95% over one year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 33% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Lindsay Australia better, we need to consider many other factors. For example, we've discovered 2 warning signs for Lindsay Australia that you should be aware of before investing here.