Investing in Solid State (LON:SOLI) Five Years Ago: A 62% Gain

Alright, let's take a trip back in time to 2020. You're sitting at your desk, coffee in hand, and you stumble upon an intriguing stock: Solid State plc (LON:SOLI). You're thinking, "Hmm, should I invest in this company?" Well, if you had, you'd be sitting pretty today with a 62% gain. Let's dive into what made this possible and what the future might hold.



First things first, Solid State is a UK-based company that designs, manufactures, and supplies electronic equipment. Now, you might be wondering, "What made this stock such a winner?" Well, it all comes down to a few key factors.

1. Strong EPS Growth: Solid State managed to grow its earnings per share (EPS) at a rate of 20% per year over the past five years. This consistent growth in earnings is a significant driver of share price appreciation.
2. Sentiment and Share Price Correlation: The EPS growth is reasonably close to the 19% average annual increase in the share price. This indicates that investor sentiment towards the shares hasn't morphed very much, and the share price has been reacting positively to the EPS growth.
3. Dividend Growth: The company has a reliable dividend yield of 2.82% and has been increasing its dividend over the years. This dividend growth, along with the reinvestment of dividends, has contributed to the total shareholder return (TSR) of 158% over the past five years.
4. Insider Buying: The fact that insiders have been buying shares in the last twelve months indicates confidence in the company's prospects.



Now, you might be thinking, "That's all well and good, but what about the future?" Well, the future prospects for Solid State depend on various factors, such as the company's ability to maintain its competitive position, expand its market share, and effectively manage its costs. However, it's important to note that the company's earnings are forecast to decline by an average of 69.2% per year for the next three years. This significant decrease in earnings growth may be a cause for concern for investors, as it could lead to a decrease in the company's share price.

In conclusion, while investing in Solid State (LON:SOLI) five years ago would have delivered you a 62% gain, the future prospects for the company appear uncertain, given the forecasted decline in earnings over the next three years. Investors should closely monitor the company's financial performance and any developments that may impact its earnings growth. As always, it's essential to do your own research and consider seeking professional advice before making any investment decisions.