Supremex (TSE:SXP) shareholders have earned a 13% CAGR over the last five years

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29-01-2025

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. For example, long term Supremex Inc. (TSE:SXP) shareholders have enjoyed a 58% share price rise over the last half decade, well in excess of the market return of around 42% (not including dividends).
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Supremex
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.
Supremex has made a profit in the past. On the other hand, it reported a trailing twelve months loss, suggesting it isn't reliably profitable. So it might be better to look at other metrics to try to understand the share price.
We note that the dividend has not increased, so that doesn't seem to explain the increase, either. It could be that the revenue growth of 11% per year is viewed as evidence that Supremex is growing. In that case, the company may be sacrificing current earnings per share to drive growth.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Supremex, it has a TSR of 83% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
Investors in Supremex had a tough year, with a total loss of 11% (including dividends), against a market gain of about 20%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 13% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 3 warning signs for Supremex (1 shouldn't be ignored!) that you should be aware of before investing here.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Canadian exchanges.
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