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When we invest, we're generally looking for stocks that outperform the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. To wit, the Science Group share price has climbed 75% in five years, easily topping the market decline of 6.1% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 3.0% in the last year , including dividends .
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
View our latest analysis for Science Group
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 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.
During the five years of share price growth, Science Group moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Science Group has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Science Group's financial health with this free report on its balance sheet.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Science Group the TSR over the last 5 years was 87%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Science Group shareholders have received returns of 3.0% over twelve months (even including dividends), which isn't far from the general market return. It has to be noted that the recent return falls short of the 13% shareholders have gained each year, over half a decade. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes Science Group a stock worth watching. Before forming an opinion on Science Group you might want to consider these 3 valuation metrics.