SpareBank 1 Østlandet (OB:SPOL) jumps 3.9% this week, though earnings growth is still tracking behind five-year shareholder returns

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And in our experience, buying the right stocks can give your wealth a significant boost. For example, long term SpareBank 1 Østlandet (OB:SPOL) shareholders have enjoyed a 59% share price rise over the last half decade, well in excess of the market return of around 19% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 13%, including dividends.

The past week has proven to be lucrative for SpareBank 1 Østlandet investors, so let's see if fundamentals drove the company's five-year performance.

Check out our latest analysis for SpareBank 1 Østlandet

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

During five years of share price growth, SpareBank 1 Østlandet achieved compound earnings per share (EPS) growth of 4.1% per year. This EPS growth is lower than the 10% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that SpareBank 1 Østlandet has improved its bottom line lately, but is it going to grow revenue? Check if analysts think SpareBank 1 Østlandet will grow revenue in the future.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, SpareBank 1 Østlandet's TSR for the last 5 years was 107%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

SpareBank 1 Østlandet provided a TSR of 13% over the last twelve months. But that was short of the market average. If we look back over five years, the returns are even better, coming in at 16% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand SpareBank 1 Østlandet better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with SpareBank 1 Østlandet , and understanding them should be part of your investment process.

If you are like me, then you will not want to miss this free list of undervalued small caps 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 Norwegian 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.

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