Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. To wit, the St. James's Place share price has climbed 12% in five years, easily topping the market decline of 1.5% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 5.4% in the last year , including dividends .
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).
Over half a decade, St. James's Place managed to grow its earnings per share at 8.9% a year. This EPS growth is higher than the 2% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that St. James's Place has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between St. James's Place's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for St. James's Place shareholders, and that cash payout contributed to why its TSR of 34%, over the last 5 years, is better than the share price return.
A Different Perspective
We're pleased to report that St. James's Place shareholders have received a total shareholder return of 5.4% over one year. Having said that, the five-year TSR of 6% a year, is even better. It's always interesting to track share price performance over the longer term. But to understand St. James's Place better, we need to consider many other factors. Even so, be aware that St. James's Place is showing 1 warning sign in our investment analysis , you should know about...
We will like St. James's Place 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 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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