By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. Just take a look at Bid Corporation Limited (JSE:BID), which is up 54%, over three years, soundly beating the market decline of 1.6% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 13% in the last year , including dividends .
Since the long term performance has been good but there's been a recent pullback of 3.0%, let's check if the fundamentals match the share price.
View our latest analysis for Bid
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During three years of share price growth, Bid achieved compound earnings per share growth of 146% per year. The average annual share price increase of 15% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Bid has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Bid's financial health with this free report on its balance sheet.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Bid, it has a TSR of 65% 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
We're pleased to report that Bid shareholders have received a total shareholder return of 13% over one year. And that does include the dividend. That's better than the annualised return of 11% over half a decade, implying that the company is doing better recently. 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 for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Bid , and understanding them should be part of your investment process.