These days it’s easy to simply buy an index fund, and your returns should (roughly) match the market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Bingo Industries Limited (ASX:BIN) share price is up 33% in the last year, clearly besting the market return of around 17% (not including dividends). So that should have shareholders smiling. We’ll need to follow Bingo Industries 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 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).
During the last year, Bingo Industries actually saw its earnings per share drop 61%.
So we don’t think that investors are paying too much attention to EPS. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.
We doubt the modest 1.3% dividend yield is doing much to support the share price. We think that the revenue growth of 32% could have some investors interested. Many businesses do go through a faze where they have to forgo some profits to drive business development, and sometimes its for the best.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
It’s probably worth noting we’ve seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So we recommend checking out this free report showing consensus forecasts
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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, Bingo Industries’s TSR for the last year was 35%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Bingo Industries shareholders should be happy with the total gain of 35% over the last twelve months , including dividends . A substantial portion of that gain has come in the last three months, with the stock up 25% in that time. This suggests the company is continuing to win over new investors. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
Bingo Industries is not the only stock that insiders are buying. 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 AU 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.