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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. Just take a look at Voss Veksel- og Landmandsbank ASA (OB:VVL), which is up 40%, over three years, soundly beating the market return of 30% (not including dividends). On the other hand, the returns haven’t been quite so good recently, with shareholders up just 36%, including dividends.
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…’ One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).
Voss Veksel- og Landmandsbank was able to grow its EPS at 32% per year over three years, sending the share price higher. This EPS growth is higher than the 12% average annual increase in the share price. So it seems investors have become more cautious about the company, over time. We’d venture the lowish P/E ratio of 7.33 also reflects the negative sentiment around the stock.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Voss Veksel- og Landmandsbank has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Voss Veksel- og Landmandsbank’s balance sheet strength is a great place to start, if you want to investigate the stock further.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Voss Veksel- og Landmandsbank’s TSR for the last 3 years was 57%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It’s nice to see that Voss Veksel- og Landmandsbank shareholders have received a total shareholder return of 36% over the last year. That’s including the dividend. That’s better than the annualised return of 9.1% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. If you would like to research Voss Veksel- og Landmandsbank in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
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.