Codan (ASX:CDA) shareholders have earned a 24% CAGR over the last five years




  • In Business
  • 2022-10-05 22:59:51Z
  • By Simply Wall St.
 

Codan Limited (ASX:CDA) shareholders might be concerned after seeing the share price drop 22% in the last quarter. But that doesn't change the fact that shareholders have received really good returns over the last five years. We think most investors would be happy with the 151% return, over that period. We think it's more important to dwell on the long term returns than the short term returns. The more important question is whether the stock is too cheap or too expensive today. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 53% drop, in the last year.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

Check out our latest analysis for Codan

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Codan achieved compound earnings per share (EPS) growth of 18% per year. This EPS growth is reasonably close to the 20% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. In fact, the share price seems to largely reflect the EPS growth.

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

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Codan's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Codan's TSR for the last 5 years was 194%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market lost about 2.8% in the twelve months, Codan shareholders did even worse, losing 51% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 24%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Codan (of which 1 is a bit concerning!) you should know about.

Codan is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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

Join A Paid User Research Session
You'll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here

COMMENTS

More Related News

BlueLinx Holdings
BlueLinx Holdings' (NYSE:BXC) investors will be pleased with their enviable 609% return over the last three years

Generally speaking, investors are inspired to be stock pickers by the potential to find the big winners. Mistakes are...

Investing in Textron (NYSE:TXT) three years ago would have delivered you a 59% gain
Investing in Textron (NYSE:TXT) three years ago would have delivered you a 59% gain

One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks...

Walt Disney Full Year 2022 Earnings: Misses Expectations
Walt Disney Full Year 2022 Earnings: Misses Expectations

Walt Disney ( NYSE:DIS ) Full Year 2022 Results Key Financial Results Revenue: US$82.7b (up 23% from FY 2021). Net...

Hudson Pacific Properties (NYSE:HPP) adds US$84m to market cap in the past 7 days, though investors from three years ago are still down 63%
Hudson Pacific Properties (NYSE:HPP) adds US$84m to market cap in the past 7 days, though investors from three years ago are still down 63%

The truth is that if you invest for long enough, you're going to end up with some losing stocks. Long term Hudson...

Comera Life Sciences Holdings, Inc. (NASDAQ:CMRA) insiders are still down US$76k after purchasing last year, recent gain helped regain some losses
Comera Life Sciences Holdings, Inc. (NASDAQ:CMRA) insiders are still down US$76k after purchasing last year, recent gain helped regain some losses

Insiders who purchased US$382k worth of Comera Life Sciences Holdings, Inc. ( NASDAQ:CMRA ) shares over the past year...

Leave a Comment

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

Cancel reply

Comments

Top News: Business