Investing in Italgas (BIT:IG) a year ago would have delivered you a 22% gain

There's no doubt that investing in the stock market is a truly brilliant way to build wealth. But not every stock you buy will perform as well as the overall market. For example, the Italgas S.p.A. (BIT:IG), share price is up over the last year, but its gain of 14% trails the market return. Having said that, the longer term returns aren't so impressive, with stock gaining just 6.0% in 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.

See our latest analysis for Italgas

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the last year Italgas grew its earnings per share (EPS) by 7.1%. The share price gain of 14% certainly outpaced the EPS growth. This indicates that the market is now more optimistic about the stock.

The graphic below depicts how EPS has changed over time (unveil 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?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Italgas the TSR over the last 1 year was 22%, 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

Italgas provided a TSR of 22% over the last twelve months. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 6% per year over five year. This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand Italgas better, we need to consider many other factors. Take risks, for example - Italgas has 2 warning signs (and 1 which can't be ignored) we think you should know about.

Of course Italgas 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 Italian exchanges.

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

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.