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It might be of some concern to shareholders to see the Luceco plc (LON:LUCE) share price down 11% in the last month. But that scarcely detracts from the really solid long term returns generated by the company over five years. It's fair to say most would be happy with 120% the gain in that time. We think it's more important to dwell on the long term returns than the short term returns. Only time will tell if there is still too much optimism currently reflected in the share price. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 39% decline over the last twelve months.
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 Luceco
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Over half a decade, Luceco managed to grow its earnings per share at 2.7% a year. This EPS growth is slower than the share price growth of 17% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free interactive report on Luceco's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Luceco the TSR over the last 5 years was 142%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!