The total return for Trelleborg (STO:TREL B) investors has risen faster than earnings growth over the last three years

By
Simply Wall St
Published
January 26, 2022
OM:TREL B
Source: Shutterstock

Low-cost index funds make it easy to achieve average market returns. But if you invest in individual stocks, some are likely to underperform. Unfortunately for shareholders, while the Trelleborg AB (publ) (STO:TREL B) share price is up 48% in the last three years, that falls short of the market return. Zooming in, the stock is up a respectable 16% in the last year.

Since the long term performance has been good but there's been a recent pullback of 6.5%, let's check if the fundamentals match the share price.

Check out our latest analysis for Trelleborg

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).

During three years of share price growth, Trelleborg moved from a loss to profitability. So we would expect a higher share price over the period.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
OM:TREL B Earnings Per Share Growth January 26th 2022

We know that Trelleborg has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

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. In the case of Trelleborg, it has a TSR of 56% 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

It's good to see that Trelleborg has rewarded shareholders with a total shareholder return of 18% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 7%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Trelleborg you should know about.

We will like Trelleborg better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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

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