One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. For example, USU Software AG (ETR:OSP2) shareholders have seen the share price rise 47% over three years, well in excess of the market return (7.7%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 27% in the last year , 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.
See our latest analysis for USU Software
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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
USU Software was able to grow its EPS at 15% per year over three years, sending the share price higher. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 14% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Au contraire, the share price change has arguably mimicked the EPS growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that USU Software has improved its bottom line lately, but is it going to grow revenue? Check if analysts think USU Software will grow revenue in the future.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for USU Software the TSR over the last 3 years was 57%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that USU Software has rewarded shareholders with a total shareholder return of 27% in the last twelve months. That's including the dividend. That gain is better than the annual TSR over five years, which is 2%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Is USU Software cheap compared to other companies? These 3 valuation measures might help you decide.