Those who invested in OTP Bank Nyrt (BUSE:OTP) a year ago are up 50%

The simplest way to invest in stocks is to buy exchange traded funds. But you can significantly boost your returns by picking above-average stocks. For example, the OTP Bank Nyrt. (BUSE:OTP) share price is up 46% in the last 1 year, clearly besting the market return of around 32% (not including dividends). So that should have shareholders smiling. However, the stock hasn't done so well in the longer term, with the stock only up 11% in three years.

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

See our latest analysis for OTP Bank Nyrt

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).

OTP Bank Nyrt was able to grow EPS by 187% in the last twelve months. This EPS growth is significantly higher than the 46% increase in the share price. So it seems like the market has cooled on OTP Bank Nyrt, despite the growth. Interesting. The caution is also evident in the lowish P/E ratio of 4.57.

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

It is of course excellent to see how OTP Bank Nyrt has grown profits over the years, but the future is more important for shareholders. This free interactive report on OTP Bank Nyrt'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. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of OTP Bank Nyrt, it has a TSR of 50% for the last 1 year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that OTP Bank Nyrt has rewarded shareholders with a total shareholder return of 50% in the last twelve months. That's including the dividend. That's better than the annualised return of 8% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Case in point: We've spotted 1 warning sign for OTP Bank Nyrt you should be aware of.

Of course OTP Bank Nyrt 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 Hungarian 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.