24-03-2025
Santova's (JSE:SNV) investors will be pleased with their incredible 525% return over the last five years
We think all investors should try to buy and hold high quality multi-year winners. And highest quality companies can see their share prices grow by huge amounts. For example, the Santova Limited (JSE:SNV) share price is up a whopping 525% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. We love happy stories like this one. The company should be really proud of that performance!
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over half a decade, Santova managed to grow its earnings per share at 24% a year. This EPS growth is lower than the 44% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Santova's key metrics by checking this interactive graph of Santova's earnings, revenue and cash flow.
Santova shareholders gained a total return of 14% during the year. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 44% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Santova you should know about.
If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on South African exchanges.
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