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 Matson, Inc. (NYSE:MATX) which saw its share price drive 242% higher over five years.    Also pleasing for shareholders was the 19% gain in the last three months.      

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.  

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, Matson achieved compound earnings per share (EPS) growth of 28% per year.    This EPS growth is remarkably close to the 28% average annual increase in the share price.   Therefore one could conclude that sentiment towards the shares hasn't morphed very much.  Indeed, it would appear the share price is reacting to the EPS.  

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

NYSE:MATX Earnings Per Share Growth June 4th 2024

Dive deeper into Matson's key metrics by checking this interactive graph of Matson's earnings, revenue and cash flow.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested.  It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend.  As it happens, Matson's TSR for the last 5 years was 273%, which exceeds the share price return mentioned earlier.  The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Matson shareholders have received a total shareholder return of 78% over one year.   Of course, that includes the dividend.     Since the one-year TSR is better than the five-year TSR (the latter coming in at 30% per year), it would seem that the stock's performance has improved in recent times.  In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper.        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.   For example, we've discovered 3 warning signs for Matson (1 is significant!) that you should be aware of before investing here.  

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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

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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.