ACEA (BIT:ACE) shareholders have earned a 43% return over the last year

The simplest way to invest in stocks is to buy exchange traded funds. But investors can boost returns by picking market-beating companies to own shares in. For example, the ACEA S.p.A. (BIT:ACE) share price is up 35% in the last 1 year, clearly besting the market return of around 9.7% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! Zooming out, the stock is actually down 0.8% in the last three years.

So let's assess the underlying fundamentals over the last 1 year and see if they've moved in lock-step with shareholder returns.

Check out our latest analysis for ACEA

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

ACEA was able to grow EPS by 59% in the last twelve months. It's fair to say that the share price gain of 35% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about ACEA as it was before. This could be an opportunity. This cautious sentiment is reflected in its (fairly low) P/E ratio of 10.75.

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

We know that ACEA has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of ACEA, it has a TSR of 43% for the last 1 year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that ACEA shareholders have received a total shareholder return of 43% over the last year. And that does include the dividend. That's better than the annualised return of 6% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand ACEA better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with ACEA (including 1 which makes us a bit uncomfortable) .

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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