Bulgarian-American Credit Bank AD (BUL:BACB) stock performs better than its underlying earnings growth over last year

Passive investing in index funds can generate returns that roughly match the overall market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Bulgarian-American Credit Bank AD (BUL:BACB) share price is up 55% in the last 1 year, clearly besting the market return of around 16% (not including dividends). That's a solid performance by our standards! It is also impressive that the stock is up 44% over three years, adding to the sense that it is a real winner.

Since the stock has added лв37m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Bulgarian-American Credit Bank AD

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Bulgarian-American Credit Bank AD was able to grow EPS by 32% in the last twelve months. This EPS growth is significantly lower than the 55% increase in the share price. This indicates that the market is now more optimistic about the stock.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It might be well worthwhile taking a look at our free report on Bulgarian-American Credit Bank AD's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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 Bulgarian-American Credit Bank AD the TSR over the last 1 year was 58%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Bulgarian-American Credit Bank AD has rewarded shareholders with a total shareholder return of 58% in the last twelve months. That's including the dividend. That's better than the annualised return of 7% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Take risks, for example - Bulgarian-American Credit Bank AD has 1 warning sign we think you should be aware of.

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 Bulgarian 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.