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Shareholders Are Thrilled That The Scales (NZSE:SCL) Share Price Increased 251%

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. One great example is Scales Corporation Limited (NZSE:SCL) which saw its share price drive 251% higher over five years. We note the stock price is up 3.3% in the last seven days.

Check out our latest analysis for Scales

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 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.

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Over half a decade, Scales managed to grow its earnings per share at 21% a year. This EPS growth is lower than the 29% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

NZSE:SCL Past and Future Earnings, December 24th 2019
NZSE:SCL Past and Future Earnings, December 24th 2019

We know that Scales has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Scales's TSR for the last 5 years was 366%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Scales provided a TSR of 25% over the last twelve months. But that was short of the market average. If we look back over five years, the returns are even better, coming in at 36% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. Importantly, we haven't analysed Scales's dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.