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Passive investing in index funds can generate returns that roughly match the overall market. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Kina Securities Limited (ASX:KSL) share price is 39% higher than it was a year ago, much better than the market return of around 19% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! And shareholders have also done well over the long term, with an increase of 34% in the last three years.
See our latest analysis for Kina Securities
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. 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.
Kina Securities was able to grow EPS by 26% in the last twelve months. The share price gain of 39% certainly outpaced the EPS growth. This indicates that the market is now more optimistic about the stock.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
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. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Kina Securities the TSR over the last year was 48%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Pleasingly, Kina Securities's total shareholder return last year was 48%. That includes the value of the dividend. So this year's TSR was actually better than the three-year TSR (annualized) of 18%. Given the track record of solid returns over varying time frames, it might be worth putting Kina Securities on your watchlist. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for Kina Securities you should be aware of.