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Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, long term Alm. Brand A/S (CPH:ALMB) shareholders have enjoyed a 61% share price rise over the last half decade, well in excess of the market return of around 42% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 2.4% , including dividends .
See our latest analysis for Alm. Brand
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).
Over half a decade, Alm. Brand managed to grow its earnings per share at 14% a year. This EPS growth is higher than the 10% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It might be well worthwhile taking a look at our free report on Alm. Brand's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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 Alm. Brand, it has a TSR of 108% for the last 5 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
Alm. Brand shareholders gained a total return of 2.4% during the year. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 16% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. Importantly, we haven't analysed Alm. Brand's dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.