Argent Industrial (JSE:ART) shareholders have earned a 40% CAGR over the last five years

We think all investors should try to buy and hold high quality multi-year winners. While not every stock performs well, when investors win, they can win big. To wit, the Argent Industrial Limited (JSE:ART) share price has soared 361% over five years. This just goes to show the value creation that some businesses can achieve. The last week saw the share price soften some 2.1%.

With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Check out our latest analysis for Argent Industrial

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over half a decade, Argent Industrial managed to grow its earnings per share at 35% a year. That makes the EPS growth particularly close to the yearly share price growth of 36%. Therefore one could conclude that sentiment towards the shares hasn’t morphed very much. Rather, the share price has approximately tracked EPS growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Dive deeper into Argent Industrial’s key metrics by checking this interactive graph of Argent Industrial’s earnings, revenue and cash flow.

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Argent Industrial, it has a TSR of 441% for the last 5 years. That exceeds its share price return that we previously mentioned. And there’s no prize for guessing that the dividend payments largely explain the divergence!

We’re pleased to report that Argent Industrial shareholders have received a total shareholder return of 76% over one year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 40%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Case in point: We’ve spotted 3 warning signs for Argent Industrial you should be aware of.

Story continues