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Low-cost index funds make it easy to achieve average market returns. But if you invest in individual stocks, some are likely to underperform. For example, the Sparebanken Øst (OB:SPOG) share price return of 24% over three years lags the market return in the same period. At least the stock price is up over the last year, albeit only by 0.7%.
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ 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.
Sparebanken Øst was able to grow its EPS at 9.1% per year over three years, sending the share price higher. The average annual share price increase of 7.5% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time. We’d venture the lowish P/E ratio of 9.56 also reflects the negative sentiment around the stock.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Sparebanken Øst’s key metrics by checking this interactive graph of Sparebanken Øst’s earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Sparebanken Øst, it has a TSR of 58% for the last 3 years. That exceeds its share price return that we previously mentioned. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It’s nice to see that Sparebanken Øst shareholders have received a total shareholder return of 9.3% over the last year. And that does include the dividend. Having said that, the five-year TSR of 12% a year, is even better. Before spending more time on Sparebanken Øst it might be wise to click here to see if insiders have been buying or selling shares.
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 NO exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.