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These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But you can significantly boost your returns by picking above-average stocks. For example, the IG Group Holdings plc (LON:IGG) share price is up 24% in the last year, clearly besting the market decline of around 10% (not including dividends). So that should have shareholders smiling. Looking back further, the share price is 22% higher than it was three years ago.
See our latest analysis for IG Group Holdings
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 the last year IG Group Holdings grew its earnings per share (EPS) by 52%. It's fair to say that the share price gain of 24% did not keep pace with the EPS growth. So it seems like the market has cooled on IG Group Holdings, despite the growth. Interesting.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that IG Group Holdings has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of IG Group Holdings, it has a TSR of 31% for the last year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's good to see that IG Group Holdings has rewarded shareholders with a total shareholder return of 31% in the last twelve months. That's including the dividend. That's better than the annualised return of 7% over half a decade, implying that the company is doing better recently. 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. Even so, be aware that IG Group Holdings is showing 1 warning sign in our investment analysis , you should know about...