Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. To wit, the SpareBank 1 Nord-Norge share price has climbed 81% in five years, easily topping the market return of 16% (ignoring dividends). On the other hand, the more recent gains haven’t been so impressive, with shareholders gaining just 5.1% , including dividends .
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.
Over half a decade, SpareBank 1 Nord-Norge managed to grow its earnings per share at 66% a year. The EPS growth is more impressive than the yearly share price gain of 13% over the same period. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 9.67 also suggests market apprehension.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It’s probably worth noting that the CEO is paid less than the median at similar sized companies. It’s always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of SpareBank 1 Nord-Norge’s earnings, revenue and cash flow.
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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for SpareBank 1 Nord-Norge the TSR over the last 5 years was 147%, 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
It’s nice to see that SpareBank 1 Nord-Norge shareholders have received a total shareholder return of 5.1% over the last year. Of course, that includes the dividend. However, that falls short of the 20% TSR per annum it has made for shareholders, each year, over five years. Potential buyers might understandably feel they’ve missed the opportunity, but it’s always possible business is still firing on all cylinders. It’s always interesting to track share price performance over the longer term. But to understand SpareBank 1 Nord-Norge better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we’ve spotted 2 warning signs for SpareBank 1 Nord-Norge you should know about.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NO 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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