The simplest way to invest in stocks is to buy exchange traded funds. But if you pick the right individual stocks, you could make more than that. To wit, the Shaver Shop Group Limited (ASX:SSG) share price is 74% higher than it was a year ago, much better than the market return of around 17% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! Zooming out, the stock is actually down 28% in the last three years.
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 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).
Shaver Shop Group was able to grow EPS by 3.7% in the last twelve months. The share price gain of 74% certainly outpaced the EPS growth. This indicates that the market is now more optimistic about the stock.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
This free interactive report on Shaver Shop Group’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Shaver Shop Group the TSR over the last year was 91%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Pleasingly, Shaver Shop Group’s total shareholder return last year was 91%. And yes, that does include the dividend. That certainly beats the loss of about 2.2% per year over three years. It could well be that the business has turned around — or else regained the confidence of investors. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
Of course Shaver Shop Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.