In This Article:
By buying an index fund, you can roughly match the market return with ease. But many of us dare to dream of bigger returns, and build a portfolio ourselves. Just take a look at NP3 Fastigheter AB (publ) (STO:NP3), which is up 71%, over three years, soundly beating the market return of 7.6% (not including dividends). However, more recent returns haven’t been as impressive as that, with the stock returning just 22% in the last year, including dividends.
View our latest analysis for NP3 Fastigheter
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.
NP3 Fastigheter was able to grow its EPS at 31% per year over three years, sending the share price higher. The average annual share price increase of 20% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock. We’d venture the lowish P/E ratio of 8.12 also reflects the negative sentiment around the stock.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. 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 NP3 Fastigheter’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 incorporates the value of any 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. We note that for NP3 Fastigheter the TSR over the last 3 years was 98%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
We’re pleased to report that NP3 Fastigheter rewarded shareholders with a total shareholder return of 22% over the last year. That includes the value of the dividend. That falls short of the 26% it has made, for shareholders, each year, over three years. 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.