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By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. Just take a look at Bravida Holding AB (publ) (STO:BRAV), which is up 50%, over three years, soundly beating the market return of 9.7% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 20% in the last year , including dividends .
Check out our latest analysis for Bravida Holding
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 three years of share price growth, Bravida Holding achieved compound earnings per share growth of 28% per year. The average annual share price increase of 15% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Bravida Holding the TSR over the last 3 years was 61%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that Bravida Holding shareholders have gained 20% (in total) over the last year. That includes the value of the dividend. So this year's TSR was actually better than the three-year TSR (annualized) of 17%. Given the track record of solid returns over varying time frames, it might be worth putting Bravida Holding on your watchlist. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.