By buying an index fund, investors can approximate the average market return. But if you choose individual stocks with prowess, you can make superior returns. Just take a look at Sparebanken Vest (OB:SVEG), which is up 28%, over three years, soundly beating the market return of 20% (not including dividends). On the other hand, the returns haven’t been quite so good recently, with shareholders up just 21% , including dividends .
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).
Sparebanken Vest was able to grow its EPS at 2.2% per year over three years, sending the share price higher. This EPS growth is lower than the 8.5% average annual increase in the share price. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. That’s not necessarily surprising considering the three-year track record of earnings growth.
You can see how EPS has changed over time in the image below.
We know that Sparebanken Vest has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Sparebanken Vest will grow revenue in the future.
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 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. We note that for Sparebanken Vest the TSR over the last 3 years was 55%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We’re pleased to report that Sparebanken Vest shareholders have received a total shareholder return of 21% over one year. Of course, that includes 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. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. If you would like to research Sparebanken Vest in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
But note: Sparebanken Vest 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 NO 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.
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.