Investing in Euronext (EPA:ENX) a year ago would have delivered you a 47% gain

The simplest way to invest in stocks is to buy exchange traded funds. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Euronext N.V. (EPA:ENX) share price is 43% higher than it was a year ago, much better than the market return of around 6.8% (not including dividends) in the same period. That's a solid performance by our standards! However, the stock hasn't done so well in the longer term, with the stock only up 1.6% in three years.

So let's assess the underlying fundamentals over the last 1 year and see if they've moved in lock-step with shareholder returns.

View our latest analysis for Euronext

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 Euronext grew its earnings per share (EPS) by 45%. This EPS growth is remarkably close to the 43% increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. It looks like the share price is responding to the EPS.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Euronext has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Euronext will grow revenue in the future.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Euronext the TSR over the last 1 year was 47%, 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 Euronext shareholders have received a total shareholder return of 47% over the last year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 11%. Therefore it seems like sentiment around the company has been positive lately. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Euronext you should know about.

We will like Euronext better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on French 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.