Shareholders of Avio (BIT:AVIO) Must Be Delighted With Their 945% Total Return

Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term Avio S.p.A. (BIT:AVIO) shareholders have enjoyed a 24% share price rise over the last half decade, well in excess of the market return of around 0.05% (not including dividends).

Check out our latest analysis for Avio

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 five years of share price growth, Avio achieved compound earnings per share (EPS) growth of 127% per year. This EPS growth is higher than the 4% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 11.45 also suggests market apprehension.

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

It is of course excellent to see how Avio has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Avio stock, you should check out this FREE detailed report on its balance sheet.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Avio's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Avio shareholders, and that cash payout contributed to why its TSR of 945%, over the last 5 years, is better than the share price return.

A Different Perspective

While the broader market lost about 7.4% in the twelve months, Avio shareholders did even worse, losing 19%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 60% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before forming an opinion on Avio you might want to consider these 3 valuation metrics.

But note: Avio 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 IT 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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