Passive investing in index funds can generate returns that roughly match the overall market. But investors can boost returns by picking market-beating companies to own shares in. For example, the H & M Hennes & Mauritz AB (publ) (STO:HM B) share price is up 58% in the last year, clearly besting than the market return of around 1.6% (not including dividends). That’s a solid performance by our standards! On the other hand, longer term shareholders have had a tougher run, with the stock falling 28% in three years.
Check out our latest analysis for H & M Hennes & Mauritz
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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).
Over the last twelve months, H & M Hennes & Mauritz actually shrank its EPS by 13%. This means it’s unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn’t seem to correlate with the change in share price, it’s worth taking a look at other metrics.
We haven’t seen H & M Hennes & Mauritz increase dividend payments yet, so the yield probably hasn’t helped drive the share higher. It seems far more likely that the 10% boost to the revenue over the last year, is making the difference. After all, it’s not necessarily a bad thing if a business sacrifices profits today in pursuit of profit tomorrow (metaphorically speaking).
H & M Hennes & Mauritz is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think H & M Hennes & Mauritz will earn in the future (free analyst consensus estimates)
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of H & M Hennes & Mauritz, it has a TSR of 67% for the last year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It’s nice to see that H & M Hennes & Mauritz shareholders have received a total shareholder return of 67% over the last year. And that does include the dividend. That certainly beats the loss of about 5.0% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. Keeping this in mind, a solid next step might be to take a look at H & M Hennes & Mauritz’s dividend track record. This free interactive graph is a great place to start.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SE exchanges.
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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Thank you for reading.