When investing in stocks, your maximum loss is usually 100% of your investment, especially if you’re not using leverage. However, there’s potential for significant gains. For example, the stock price of Technology One Limited (ASX:TNE) has jumped 275% over the past five years. Recently, it saw a 23% increase in just the last quarter.
In the past week alone, Technology One added AU$370 million to its market value. Let’s explore whether this momentum comes from strong performance.
Stock prices often reflect how investors feel about a company. One way to gauge this sentiment is by comparing earnings per share (EPS) with the share price.
Over five years, Technology One grew its EPS by 14% each year. In contrast, the share price grew by an impressive 30% annually. This indicates that investors have become more optimistic about the company. It makes sense, considering their strong track record of earnings. The current P/E ratio is quite high at 88.92, reflecting that belief.
The graphic below shows the EPS growth over time (click the image for more details).
Interestingly, there has been notable insider buying in the past three months, which is a promising sign. However, we believe revenue and earnings trends are key indicators of overall business health. If you’re curious, explore this free interactive report on Technology One’s earnings, revenue, and cash flow.
Investors should also think about total shareholder return (TSR). This figure includes cash dividends, assuming they were reinvested. For Technology One, the TSR over the last five years is an impressive 298%, which is higher than just the share price return. Dividends are clearly playing a big role in this difference.
In the last year, Technology One shareholders enjoyed a TSR of 104%. This includes dividends and indicates that the stock’s performance has improved recently. Comparatively, the five-year TSR is 32% per year. Some might see this rise as evidence that the business is strengthening. Looking at share prices over time can give insight into a company’s performance, but it’s essential to consider other factors too. Note that Technology One has 1 warning sign in our analysis that you should be aware of.
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earnings per share, share price, business performance, TSR
