Passive investing in index funds can generate returns that roughly match the overall market. But investors can boost returns by picking market-beating companies to own shares in. For example, the Weis Markets, Inc. (NYSE:WMK) share price is up 33% in the last year, clearly besting the market return of around 24% (not including dividends). That's a solid performance by our standards! Longer term, the stock is up 28% in three years.
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Weis Markets was able to grow EPS by 90% in the last twelve months. This EPS growth is significantly higher than the 33% increase in the share price. Therefore, it seems the market isn't as excited about Weis Markets as it was before. This could be an opportunity. The caution is also evident in the lowish P/E ratio of 11.82.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Weis Markets' key metrics by checking this interactive graph of Weis Markets's earnings, revenue and cash flow.
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 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 Weis Markets, it has a TSR of 37% for the last year. 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 nice to see that Weis Markets shareholders have received a total shareholder return of 37% over the last year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 8% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Is Weis Markets cheap compared to other companies? These 3 valuation measures might help you decide.
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 US 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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