Asseco Poland (WSE:ACP) shareholders notch a 31% CAGR over 3 years, yet earnings have been shrinking

By buying an index fund, investors can approximate the average market return. But if you pick the right individual stocks, you could make more than that. Just take a look at Asseco Poland S.A. (WSE:ACP), which is up 92%, over three years, soundly beating the market return of 12% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 28% in the last year , including dividends .

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

Check out our latest analysis for Asseco Poland

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. 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.

Over the last three years, Asseco Poland failed to grow earnings per share, which fell 3.8% (annualized).

Given the share price resilience, we don't think the (declining) EPS numbers are a good measure of how the business is moving forward, right now. So other metrics may hold the key to understanding what is influencing investors.

It may well be that Asseco Poland revenue growth rate of 15% over three years has convinced shareholders to believe in a brighter future. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We know that Asseco Poland 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. 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. In the case of Asseco Poland, it has a TSR of 122% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Asseco Poland shareholders gained a total return of 28% during the year. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 14% over half a decade It is possible that returns will improve along with the business fundamentals. Importantly, we haven't analysed Asseco Poland's dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.

But note: Asseco Poland may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on PL exchanges.

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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. 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.
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