The Alpha Financial Markets Consulting (LON:AFM) Share Price Is Up 41% And Shareholders Are Holding On

By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. For example, the Alpha Financial Markets Consulting plc (LON:AFM) share price is up 41% in the last three years, clearly besting the market decline of around 8.1% (not including dividends).

Check out our latest analysis for Alpha Financial Markets Consulting

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 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 three years of share price growth, Alpha Financial Markets Consulting moved from a loss to profitability. So we would expect a higher share price over the period.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Alpha Financial Markets Consulting has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Alpha Financial Markets Consulting's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Alpha Financial Markets Consulting's TSR for the last 3 years was 50%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

The last twelve months weren't great for Alpha Financial Markets Consulting shares, which performed worse than the market, costing holders 5.9%, including dividends. The market shed around 2.4%, no doubt weighing on the stock price. Investors are up over three years, booking 14% per year, much better than the more recent returns. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Alpha Financial Markets Consulting is showing 5 warning signs in our investment analysis , you should know about...

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 GB exchanges.

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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. 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.
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