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It hasn't been the best quarter for Sono-Tek Corporation (NASDAQ:SOTK) shareholders, since the share price has fallen 16% in that time. But that scarcely detracts from the really solid long term returns generated by the company over five years. Indeed, the share price is up an impressive 102% in that time. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Of course, that doesn't necessarily mean it's cheap now. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 26% drop, in the last year.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
Check out our latest analysis for Sono-Tek
There is no denying that markets are sometimes efficient, but prices do not always reflect 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.
During five years of share price growth, Sono-Tek achieved compound earnings per share (EPS) growth of 17% per year. This EPS growth is reasonably close to the 15% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. In fact, the share price seems to largely reflect the EPS growth.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
While the broader market gained around 11% in the last year, Sono-Tek shareholders lost 26%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 15%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Sono-Tek better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Sono-Tek you should be aware of, and 1 of them is concerning.