Santova Limited (JSE:SNV) shareholders might be concerned after seeing the share price drop 19% in the last quarter. But in three years the returns have been great. Indeed, the share price is up a very strong 174% in that time. So the recent fall in the share price should be viewed in that context. Only time will tell if there is still too much optimism currently reflected in the share price.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
View our latest analysis for Santova
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Santova was able to grow its EPS at 46% per year over three years, sending the share price higher. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 40% average annual increase in the share price. This observation indicates that the market's attitude to the business hasn't changed all that much. Quite to the contrary, the share price has arguably reflected the EPS growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Santova has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Santova stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
It's good to see that Santova has rewarded shareholders with a total shareholder return of 1.2% in the last twelve months. However, the TSR over five years, coming in at 20% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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. Case in point: We've spotted 2 warning signs for Santova you should be aware of.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on South African exchanges.
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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.