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One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. For example, Alstom SA (EPA:ALO) shareholders have seen the share price rise 91% over three years, well in excess of the market return (33%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 7.6%, including dividends.
View our latest analysis for Alstom
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 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.
Alstom became profitable within the last three years. That would generally be considered a positive, so we'd expect the share price to be up.
We know that Alstom has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Alstom stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Alstom's TSR for the last 3 years was 94%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that Alstom shareholders have received a total shareholder return of 7.6% over one year. Of course, that includes the dividend. However, that falls short of the 9.4% TSR per annum it has made for shareholders, each year, over five years. Before forming an opinion on Alstom you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
Of course Alstom 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 FR 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.