Shareholders Of Opal Balance Investments (TLV:OPAL) Must Be Happy With Their 69% Return

By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, Opal Balance Investments Ltd (TLV:OPAL) shareholders have seen the share price rise 47% over three years, well in excess of the market return (18%, not including dividends).

View our latest analysis for Opal Balance Investments

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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Opal Balance Investments was able to grow its EPS at 7.7% per year over three years, sending the share price higher. In comparison, the 14% per year gain in the share price outpaces the EPS growth. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It is quite common to see investors become enamoured with a business, after a few years of solid progress.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

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 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 Opal Balance Investments the TSR over the last 3 years was 69%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Opal Balance Investments shareholders are down 20% for the year, (even including dividends), but the broader market is up 1.6%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Fortunately the longer term story is brighter, with total returns averaging about 19% per year over three years. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. It's always interesting to track share price performance over the longer term. But to understand Opal Balance Investments better, we need to consider many other factors. Even so, be aware that Opal Balance Investments is showing 3 warning signs in our investment analysis , you should know about...

But note: Opal Balance Investments may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

When trading Opal Balance Investments or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.