One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. For example, the Sparebanken Vest (OB:SVEG) share price is up 56% in the last three years, clearly besting than the market return of around 34% (not including dividends). However, more recent returns haven’t been as impressive as that, with the stock returning just 4.2% in the last year, including dividends.
There is no denying that markets are sometimes efficient, but prices do not always reflect 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.
During the three years of share price growth, Sparebanken Vest actually saw its earnings per share (EPS) drop 1.5% per year. Companies are not always focussed on EPS growth in the short term, and looking at how the share price has reacted, we don’t think EPS is the most important metric for Sparebanken Vest at the moment. So other metrics may hold the key to understanding what is influencing investors.
We note that the dividend is higher than it was preciously, so that may have assisted the share price. Sometimes yield-chasing investors will flock to a company if they think the dividend can grow over time. The revenue growth of about 7.8% per year might also encourage buyers.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
We know that Sparebanken Vest has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Sparebanken Vest in this interactive graph of future profit estimates.
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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Sparebanken Vest’s TSR for the last 3 years was 87%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
We’re pleased to report that Sparebanken Vest shareholders have received a total shareholder return of 4.2% over one year. Of course, that includes the dividend. However, the TSR over five years, coming in at 11% per year, is even more impressive. Potential buyers might understandably feel they’ve missed the opportunity, but it’s always possible business is still firing on all cylinders. Importantly, we haven’t analysed Sparebanken Vest’s dividend history. This free visual report on its dividends is a must-read if you’re thinking of buying.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.