Stock Analysis

Naspers (JSE:NPN) Has Gifted Shareholders With A Fantastic 198% Total Return On Their Investment

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JSE:NPN
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Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Naspers Limited (JSE:NPN) share price is up 85% in the last 5 years, clearly besting the market return of around 6.5% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 44% in the last year , including dividends .

Check out our latest analysis for Naspers

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, Naspers achieved compound earnings per share (EPS) growth of 19% per year. This EPS growth is higher than the 13% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
JSE:NPN Earnings Per Share Growth January 28th 2021

It might be well worthwhile taking a look at our free report on Naspers' earnings, revenue and cash flow.

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. As it happens, Naspers' TSR for the last 5 years was 198%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Naspers shareholders have received a total shareholder return of 44% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 24% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before spending more time on Naspers it might be wise to click here to see if insiders have been buying or selling shares.

Of course Naspers may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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

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