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The simplest way to invest in stocks is to buy exchange traded funds. But you can significantly boost your returns by picking above-average stocks. To wit, the Ashley Services Group Limited (ASX:ASH) share price is 38% higher than it was a year ago, much better than the market return of around 5.4% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! The longer term returns have not been as good, with the stock price only 20% higher than it was three years ago.
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 Ashley Services Group grew its earnings per share (EPS) by 196%. It’s fair to say that the share price gain of 38% did not keep pace with the EPS growth. Therefore, it seems the market isn’t as excited about Ashley Services Group as it was before. This could be an opportunity. This cautious sentiment is reflected in its (fairly low) P/E ratio of 7.44.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into Ashley Services Group’s key metrics by checking this interactive graph of Ashley Services Group’s earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Ashley Services Group the TSR over the last year was 51%, 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 Ashley Services Group rewarded shareholders with a total shareholder return of 51% over the last year. And yes, that does include the dividend. That’s better than the annualized TSR of 9.5% over the last three years. These improved returns may hint at some real business momentum, implying that now could be a great time to delve deeper. If you would like to research Ashley Services Group in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
If you are like me, then you will not want to miss this free list of growing companies that insiders are 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 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. Thank you for reading.