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If you want to compound wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual stocks, you could make more than that. For example, the PWR Holdings Limited (ASX:PWH) share price is up 63% in the last year, clearly besting than the market return of around 5.8% (not including dividends). That’s a solid performance by our standards! Looking back further, the stock price is 46% higher than it was three years ago.
See our latest analysis for PWR Holdings
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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
PWR Holdings was able to grow EPS by 27% in the last twelve months. The share price gain of 63% certainly outpaced the EPS growth. So it’s fair to assume the market has a higher opinion of the business than it a year ago.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that PWR Holdings has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of PWR Holdings, it has a TSR of 67% for the last year. That exceeds its share price return that we previously mentioned. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We’re pleased to report that PWR Holdings rewarded shareholders with a total shareholder return of 67% over the last year. And yes, that does include the dividend. That’s better than the annualized TSR of 16% over the last three years. Given the track record of solid returns over varying time frames, it might be worth putting PWR Holdings on your watchlist. Before spending more time on PWR Holdings it might be wise to click here to see if insiders have been buying or selling shares.
We will like PWR Holdings 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 AU 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.