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The McCoy Global Inc. (TSE:MCB) share price has had a bad week, falling 13%. But that doesn't undermine the fantastic longer term performance (measured over five years). To be precise, the stock price is 725% higher than it was five years ago, a wonderful performance by any measure. So we don't think the recent decline in the share price means its story is a sad one. The most important thing for savvy investors to consider is whether the underlying business can justify the share price gain. We love happy stories like this one. The company should be really proud of that performance!
Although McCoy Global has shed CA$12m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Over half a decade, McCoy Global managed to grow its earnings per share at 108% a year. This EPS growth is higher than the 52% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. This cautious sentiment is reflected in its (fairly low) P/E ratio of 9.22.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how McCoy Global has grown profits over the years, but the future is more important for shareholders. This free interactive report on McCoy Global's balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for McCoy Global the TSR over the last 5 years was 771%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that McCoy Global shareholders have received a total shareholder return of 63% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 54%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for McCoy Global you should know about.