Some Impax Asset Management Group plc (LON:IPX) Shareholders are probably quite worried to see the stock price drop 32% in the past three months. But over five years, the returns have been remarkably high. Indeed, the stock price rose 515% during this period. It could therefore be that some shareholders take profits after good performance. But the real question is whether the company’s fundamentals can improve over the long term. While the long-term returns are impressive, we have some sympathy for those who bought more recently, given last year’s 46% decline. Anyone who held out for this rewarding ride would probably be keen to talk about it.
After a strong gain last week, it’s worth seeing if longer-term returns have been driven by improving fundamentals.
See our latest analysis for Impax Asset Management Group
To paraphrase Benjamin Graham: in the short term, the market is a voting machine, but in the long term, it is a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get an idea of how investors’ attitudes toward a company change over time.
In five years of share price growth, Impax Asset Management Group has achieved compound earnings per share (EPS) growth of 56% per annum. The EPS growth is more impressive than the annual share price gain of 44% over the same period. One could therefore conclude that the broader market has become more cautious towards the stock.
You can see how EPS has changed over time in the image below (click on the graph to see the exact values).
We consider it positive that insiders have made significant purchases over the past year. That said, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be interesting to take a look at our free Impax Asset Management Group earnings, revenue and cash flow report.
What about dividends?
In addition to measuring share price performance, investors should also consider total shareholder return (TSR). TSR is a calculation of return that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of all discounted capital raisings and spinoffs. It can be said that the TSR gives a more complete picture of the return generated by a stock. We note that for Impax Asset Management Group the TSR over the last 5 years was 579%, which is better than the share price return mentioned above. And there’s no price guessing that dividend payouts largely explain the divergence!
A different perspective
While the broader market lost around 4.7% in the twelve months, Impax Asset Management Group shareholders fared even worse, losing 45% (even including dividends). However, it could simply be that the stock price was impacted by greater market jitters. It might be worth keeping an eye on the fundamentals, in case there is a good opportunity. Longer-term investors wouldn’t be so upset, as they would have gained 47%, every year, over five years. It could be that the recent selloff is an opportunity, so it may be worth checking the fundamentals for signs of a long-term growth trend. I find it very interesting to look at stock price over the long term as a proxy for company performance. But to really get insight, we also need to consider other information. For example, we found 2 warning signs for Impax Asset Management Group which you should be aware of before investing here.
Impax Asset Management Group isn’t the only stock insider to buy. So take a look at this free list of growing companies with insider buying.
Please note that the market returns quoted in this article reflect the market-weighted average returns of the shares currently trading on UK stock exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.