Stellantis' (BIT:STLA) 53% return outpaced the company's earnings growth over the same one-year period

By
Simply Wall St
Published
January 18, 2022
BIT:STLA
Source: Shutterstock

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Stellantis N.V. (BIT:STLA) share price is up 42% in the last 1 year, clearly besting the market return of around 21% (not including dividends). So that should have shareholders smiling. We'll need to follow Stellantis for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

View our latest analysis for Stellantis

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. 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.

Stellantis was able to grow EPS by 30% in the last twelve months. The share price gain of 42% certainly outpaced the EPS growth. So it's fair to assume the market has a higher opinion of the business than it a year ago.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

earnings-per-share-growth
BIT:STLA Earnings Per Share Growth January 18th 2022

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Stellantis' earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Stellantis' 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. Stellantis hasn't been paying dividends, but its TSR of 53% exceeds its share price return of 42%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

Stellantis shareholders should be happy with the total gain of 53% over the last twelve months. A substantial portion of that gain has come in the last three months, with the stock up 14% in that time. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Stellantis by clicking this link.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

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