The 13% return this week takes IVE Group's (ASX:IGL) shareholders one-year gains to 208%

By
Simply Wall St
Published
August 12, 2021
ASX:IGL
Source: Shutterstock

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you pick the right stock, you can make a lot more than 100%. For example, the IVE Group Limited (ASX:IGL) share price has soared 194% return in just a single year. On top of that, the share price is up 30% in about a quarter. In contrast, the longer term returns are negative, since the share price is 24% lower than it was three years ago.

The past week has proven to be lucrative for IVE Group investors, so let's see if fundamentals drove the company's one-year performance.

See our latest analysis for IVE Group

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Over the last twelve months IVE Group went from profitable to unprofitable. While some may see this as temporary, we're a skeptical bunch, and so we're a little surprised to see the share price go up. We might get a clue to explain the share price move by looking to other metrics.

Absent any improvement, we don't think a thirst for dividends is pushing up the IVE Group's share price. And at a glance the languishing revenue does not impress, though a closer look might help explain the market optimism.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

earnings-and-revenue-growth
ASX:IGL Earnings and Revenue Growth August 13th 2021

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, IVE Group's TSR for the last 1 year was 208%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that IVE Group has rewarded shareholders with a total shareholder return of 208% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 1.0% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 3 warning signs for IVE Group that you should be aware of.

But note: IVE Group 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 AU exchanges.

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