Lerøy Seafood Group (OB:LSG) pulls back 3.5% this week, but still delivers shareholders decent 31% return over 1 year

If you want to compound wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual stocks, you could make more than that. For example, the Lerøy Seafood Group ASA (OB:LSG) share price is up 24% in the last 1 year, clearly besting the market return of around 4.0% (not including dividends). So that should have shareholders smiling. Unfortunately the longer term returns are not so good, with the stock falling 21% in the last three years.

Since the long term performance has been good but there's been a recent pullback of 3.5%, let's check if the fundamentals match the share price.

See our latest analysis for Lerøy Seafood Group

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. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the last year Lerøy Seafood Group grew its earnings per share, moving from a loss to a profit.

When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action.

Absent any improvement, we don't think a thirst for dividends is pushing up the Lerøy Seafood Group's share price. Rather, we'd posit that the revenue increase of 3.8% might be more meaningful. Revenue growth often does precede earnings growth, so some investors might be willing to forgo profits today because they have their eyes fixed firmly on the future.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We know that Lerøy Seafood Group has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 Lerøy Seafood Group the TSR over the last 1 year was 31%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Lerøy Seafood Group shareholders have received a total shareholder return of 31% over one year. That's including the dividend. That's better than the annualised return of 0.3% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 1 warning sign we've spotted with Lerøy Seafood Group .

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 Norwegian exchanges.

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

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.