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. For example, the Strix Group Plc (LON:KETL) share price is up 46% in the last year, clearly besting the market return of around 17% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! We’ll need to follow Strix Group for a while to get a better sense of its share price trend, since it hasn’t been listed for particularly long.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the last year, Strix Group actually saw its earnings per share drop 4.4%.
Sometimes companies will sacrifice EPS in the short term for longer term gains; and in that case we may be able to find other positives. 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.
For starters, we suspect the share price has been buoyed by the dividend, which was increased during the year. Income-seeking investors probably helped bid up the stock price. Furthermore, the revenue growth of 3.2% probably also encouraged buyers.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Fundamentally, investors are buying a company’s future earnings, but the stability of the business can influence the price they’re willing to pay. For example, we’ve discovered 3 warning signs for Strix Group 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Strix Group’s TSR for the last year was 52%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Strix Group boasts a total shareholder return of 52% for the last year (that includes the dividends) . A substantial portion of that gain has come in the last three months, with the stock up 17% in that time. This suggests the company is continuing to win over new investors. Keeping this in mind, a solid next step might be to take a look at Strix Group’s dividend track record. This free interactive graph is a great place to start.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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