The simplest way to invest in stocks is to buy exchange traded funds. But you can significantly boost your returns by picking above-average stocks. To wit, the Ascom Holding AG (VTX:ASCN) share price is 77% higher than it was a year ago, much better than the market decline of around 0.4% (not including dividends) in the same period. That's a solid performance by our standards! On the other hand, longer term shareholders have had a tougher run, with the stock falling 10% in three years.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for Ascom Holding
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.
During the last year Ascom Holding grew its earnings per share (EPS) by 125%. This EPS growth is significantly higher than the 77% increase in the share price. Therefore, it seems the market isn't as excited about Ascom Holding as it was before. This could be an opportunity.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how Ascom Holding has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Ascom Holding's financial health with this free 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Ascom Holding the TSR over the last 1 year was 81%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We're pleased to report that Ascom Holding shareholders have received a total shareholder return of 81% over one year. And that does include the dividend. Notably the five-year annualised TSR loss of 7% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Ascom Holding you should know about.