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The simplest way to invest in stocks is to buy exchange traded funds. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Fidelity National Financial, Inc. (NYSE:FNF) share price is up 70% in the last year, clearly besting the market return of around 45% (not including dividends). That's a solid performance by our standards! The longer term returns have not been as good, with the stock price only 23% higher than it was three years ago.
Check out our latest analysis for Fidelity National Financial
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the last year Fidelity National Financial grew its earnings per share (EPS) by 152%. It's fair to say that the share price gain of 70% did not keep pace with the EPS growth. So it seems like the market has cooled on Fidelity National Financial, despite the growth. Interesting. This cautious sentiment is reflected in its (fairly low) P/E ratio of 6.36.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Fidelity National Financial's earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Fidelity National Financial's TSR for the last year was 77%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's nice to see that Fidelity National Financial shareholders have received a total shareholder return of 77% over the last year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 17% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Fidelity National Financial (of which 1 is significant!) you should know about.