By buying an index fund, investors can approximate the average market return. But if you pick the right individual stocks, you could make more than that. For example, the OUTsurance Group Limited (JSE:OUT) share price is up 35% in the last three years, clearly besting the market decline of around 1.0% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 22% , including dividends .
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
Check out our latest analysis for OUTsurance Group
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
OUTsurance Group was able to grow its EPS at 54% per year over three years, sending the share price higher. The average annual share price increase of 11% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that OUTsurance Group has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling OUTsurance Group stock, you should check out this FREE detailed report on its balance sheet.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of OUTsurance Group, it has a TSR of 198% for the last 3 years. 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 OUTsurance Group has rewarded shareholders with a total shareholder return of 22% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 22% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand OUTsurance Group better, we need to consider many other factors. For example, we've discovered 1 warning sign for OUTsurance Group that you should be aware of before investing here.