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Stock pickers are generally looking for stocks that will outperform the broader market. And in our experience, buying the right stocks can give your wealth a significant boost. For example, the Mattioli Woods plc (LON:MTW) share price is up 81% in the last 5 years, clearly besting than the market return of around 2.9% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 4.2%, including dividends.
See our latest analysis for Mattioli Woods
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 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, Mattioli Woods achieved compound earnings per share (EPS) growth of 9.8% per year. This EPS growth is lower than the 13% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Mattioli Woods, it has a TSR of 99% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Mattioli Woods has rewarded shareholders with a total shareholder return of 4.2% in the last twelve months. And that does include the dividend. However, that falls short of the 15% TSR per annum it has made for shareholders, each year, over five years. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. If you would like to research Mattioli Woods in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.