Investing in SThree (LON:STEM) Five Years Ago: A 68% Gain

Investing in SThree (LON:STEM) five years ago would have delivered a substantial return, with a 68% gain. This article explores the key factors that contributed to this impressive performance.


1. **Revenue Growth and EPS Contribution**

SThree's revenue growth and earnings per share (EPS) have been significant drivers of its stock performance. In the last five years, SThree's revenue has grown by an average of 12% annually, while EPS has increased by 15% per year. This strong financial performance has translated into a significant increase in the stock price.

2. **Valuation Ratios**

Changes in SThree's valuation ratios have also played a role in its 68% gain. The company's price-to-earnings (PE) ratio has increased from 8.89 to 10.37, indicating that investors are willing to pay more for each pound of earnings. Additionally, the enterprise value (EV) to earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio has risen from 4.68 to 7.29, reflecting the increased value placed on SThree's cash flows.

3. **Dividends and Share Buybacks**

SThree's dividends and share buybacks have also contributed to its 68% gain. The company has maintained a consistent dividend payout, with a growth rate of 3.75% over the past five years. The dividend yield of 4.48% provides a steady income stream for investors. Additionally, SThree has implemented a share buyback program, with a buyback yield of 0.22%, which helps to reduce the number of outstanding shares and increase earnings per share.


4. **Debt-to-Equity Ratio and Interest Coverage**

SThree's debt-to-equity ratio has remained relatively low and stable over the past five years, indicating a strong financial position. The company's interest coverage ratio has also been consistently high, demonstrating its ability to meet its debt obligations.

5. **ROE, ROIC, and Key Drivers**

SThree's return on equity (ROE) and return on invested capital (ROIC) have been key drivers of its stock performance. The company's ROE has averaged 26.60% over the past five years, while its ROIC has averaged 20.01%. These high returns indicate that SThree is effectively utilizing its capital to generate profits. The key drivers behind these high returns include strong revenue growth, efficient use of assets, and a focus on core competencies.


In conclusion, investing in SThree (LON:STEM) five years ago has resulted in a 68% gain, driven by strong revenue growth, EPS increases, changes in valuation ratios, and a consistent dividend policy. The company's financial health, as evidenced by its low debt-to-equity ratio and high interest coverage, has also contributed to its impressive performance. As SThree continues to focus on its core competencies and generate high returns on capital, it is well-positioned to deliver further value to investors.