
The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on a lighter note, a good company can see its share price rise well over 100%. For instance, the price of Costamare Inc. (NYSE:CMRE) stock is up an impressive 139% over the last five years. It’s also good to see the share price up 34% over the last quarter.
So let’s investigate and see if the longer term performance of the company has been in line with the underlying business’ progress.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
During the five years of share price growth, Costamare moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
This free interactive report on Costamare’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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. In the case of Costamare, it has a TSR of 311% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Costamare shareholders have received returns of 20% over twelve months (even including dividends), which isn’t far from the general market return. We should note here that the five-year TSR is more impressive, at 33% per year. Although the share price growth has slowed, the longer term story points to a business well worth watching. 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 for instance, the ever-present spectre of investment risk. We’ve identified 4 warning signs with Costamare (at least 1 which is concerning) , and understanding them should be part of your investment process.