Passive investing in index funds can generate returns that roughly match the overall market. But you can significantly boost your returns by picking above-average stocks. For example, the Lindsay Australia Limited (ASX:LAU) share price is up 12% in the last 1 year, clearly besting the market return of around 4.1% (not including dividends). That's a solid performance by our standards! However, the longer term returns haven't been so impressive, with the stock up just 6.4% in the last three years.
The past week has proven to be lucrative for Lindsay Australia investors, so let's see if fundamentals drove the company's one-year performance.
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.
During the last year Lindsay Australia grew its earnings per share (EPS) by 15%. It's fair to say that the share price gain of 12% did not keep pace with the EPS growth. So it seems like the market has cooled on Lindsay Australia, despite the growth. Interesting.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Lindsay Australia has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Lindsay Australia 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Lindsay Australia the TSR over the last 1 year was 18%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that Lindsay Australia shareholders have received a total shareholder return of 18% over the last year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 6% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 3 warning signs for Lindsay Australia that you should be aware of before investing here.
Of course Lindsay Australia may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.