The five-year decline in earnings might be taking its toll on SalMar (OB:SALM) shareholders as stock falls 4.2% over the past week

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term SalMar ASA (OB:SALM) shareholders have enjoyed a 65% share price rise over the last half decade, well in excess of the market return of around 13% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 47% in the last year , including dividends .

Since the long term performance has been good but there's been a recent pullback of 4.2%, let's check if the fundamentals match the share price.

See our latest analysis for SalMar

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

SalMar's earnings per share are down 9.4% per year, despite strong share price performance over five years.

This means it's unlikely the market is judging the company based on earnings growth. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

In fact, the dividend has increased over time, which is a positive. It could be that the company is reaching maturity and dividend investors are buying for the yield. We'd posit that the revenue growth over the last five years, of 18% per year, would encourage people to invest.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So it makes a lot of sense to check out what analysts think SalMar will earn in the future (free profit forecasts).

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for SalMar the TSR over the last 5 years was 100%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that SalMar has rewarded shareholders with a total shareholder return of 47% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 15%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand SalMar better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for SalMar you should be aware of.

But note: SalMar may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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