Netcall’s (LON:NET) total investor return has grown faster than earnings growth over the past three years

Shareholders might be concerned that the Netcall plc (LON:NET) share price down 12% in the last month. On the other hand, the three-year return is impressive. The stock price has climbed over this period and is now 156% higher than it was. After a run like that, some may not be surprised to see moderate prices. If the company can perform well for years to come, the recent decline could be an opportunity.

Although Netcall lost £14m of its market capitalization this week, let’s take a look at its longer-term fundamental trends and see if they have generated any returns.

See our latest analysis for Netcall

While markets are a powerful pricing mechanism, stock prices reflect investor sentiment, not just underlying trading performance. 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 three years of share price growth, Netcall has achieved compound earnings per share growth of 65% per year. The average annual share price increase of 37% is actually less than EPS growth. So it seems investors have become more cautious about the company over time. Of course, with a P/E ratio of 96.79, the market remains bullish.

You can see below how the EPS has evolved over time (find out the exact values ​​by clicking on the image).

We know that Netcall has improved its results over the past three years, but what does the future hold? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive chart.

What about dividends?

In addition to measuring share price performance, investors should also consider total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital increases, as well as any dividends, on the basis of the assumption that dividends are reinvested. So for companies that pay a generous dividend, the TSR is often much higher than the stock price return. We note that for Netcall the TSR over the last 3 years was 160%, 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

The 12% total return received by Netcall shareholders over the past year is not far off the market return of -11%. Longer-term investors wouldn’t be so upset, as they would have gained 11%, every year, over five years. If the stock price has been impacted by changing sentiment, rather than deteriorating trading conditions, this could be an opportunity. 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. Like risks, for example. Every business has them, and we’ve spotted 4 warning signs for Netcall (1 of which is a little unpleasant!) that you should know about.

We’ll like Netcall better if we see big insider buying. In the meantime, watch this free list of growing companies with significant and recent 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.