Should Avanza Bank Holding (STO:AZA) Be Disappointed With Their 51% Profit?

It hasn’t been the best quarter for Avanza Bank Holding AB (publ) (STO:AZA) shareholders, since the share price has fallen 13% in that time. On the bright side the share price is up over the last half decade. However we are not very impressed because the share price is only up 51%, less than the market return of 61%.

Check out our latest analysis for Avanza Bank Holding

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 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 five years of share price growth, Avanza Bank Holding achieved compound earnings per share (EPS) growth of 8.3% per year. This EPS growth is remarkably close to the 8.6% average annual increase in the share price. That suggests that the market sentiment around the company hasn’t changed much over that time. In fact, the share price seems to largely reflect the EPS growth.

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

OM:AZA Past and Future Earnings, April 23rd 2019
OM:AZA Past and Future Earnings, April 23rd 2019

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Avanza Bank Holding’s TSR for the last 5 years was 78%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 10% in the last year, Avanza Bank Holding shareholders lost 6.1% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 12% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

Avanza Bank Holding is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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