Investors in DCC (LON:DCC) have seen notable returns of 39% over the past 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 DCC plc (LON:DCC) share price is up 33% in the last 1 year, clearly besting the market return of around 2.3% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! In contrast, the longer term returns are negative, since the share price is 7.1% lower than it was three years ago.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

Check out our latest analysis for DCC

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the last year DCC grew its earnings per share (EPS) by 1.2%. This EPS growth is significantly lower than the 33% increase in the share price. So it's fair to assume the market has a higher opinion of the business than it a year ago.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, DCC's TSR for the last 1 year was 39%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that DCC shareholders have received a total shareholder return of 39% over the last year. That's including the dividend. Notably the five-year annualised TSR loss of 0.2% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. Keeping this in mind, a solid next step might be to take a look at DCC's dividend track record. This free interactive graph is a great place to start.

We will like DCC better if we see some big insider buys. While we wait, check out this free list of growing companies 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 British 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.