Investing in Macmahon Holdings (ASX:MAH) a year ago would have delivered you a 79% gain

The simplest way to invest in stocks is to buy exchange traded funds. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Macmahon Holdings Limited (ASX:MAH) share price is 70% higher than it was a year ago, much better than the market return of around 9.9% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! The longer term returns have not been as good, with the stock price only 12% higher than it was three years ago.

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 Macmahon Holdings

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.

Macmahon Holdings was able to grow EPS by 51% in the last twelve months. This EPS growth is significantly lower than the 70% increase in the share price. This indicates that the market is now more optimistic about the stock.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

earnings-per-share-growthearnings-per-share-growth

earnings-per-share-growth

We know that Macmahon Holdings has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Macmahon Holdings’ TSR for the last 1 year was 79%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It’s good to see that Macmahon Holdings has rewarded shareholders with a total shareholder return of 79% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 5%. 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Macmahon Holdings is showing 1 warning sign in our investment analysis , you should know about…

If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.


Source link

Check Also

1 Stock That Turned $1,000 Into $30 Million

Investing in the stock market is one of the best ways that people can grow …

Leave a Reply

Your email address will not be published. Required fields are marked *