By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. For example, Northern Technologies International Corporation (NASDAQ:NTIC) shareholders have seen the share price rise 97% over three years, well in excess of the market return (39%, not including dividends).
View our latest analysis for Northern Technologies International
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).
Northern Technologies International became profitable within the last three years. That would generally be considered a positive, so we’d expect the share price to be up.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
While share prices often depend primarily on earnings, they can be sensitive to an investment’s risk level as well. For example, we’ve discovered 1 warning sign for Northern Technologies International which any shareholder or potential investor should be aware of.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Northern Technologies International, it has a TSR of 105% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Investors in Northern Technologies International had a tough year, with a total loss of 3.0% (including dividends) , against a market gain of about 30%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 4.2% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Before deciding if you like the current share price, check how Northern Technologies International scores on these 3 valuation metrics.
We will like Northern Technologies International better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
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.