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When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. For example, long term Calian Group Ltd. (TSE:CGY) shareholders have enjoyed a 72% share price rise over the last half decade, well in excess of the market return of around 0.4% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 12% in the last year, including dividends.
View our latest analysis for Calian Group
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.
Over half a decade, Calian Group managed to grow its earnings per share at 5.0% a year. This EPS growth is slower than the share price growth of 12% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Calian Group the TSR over the last 5 years was 118%, 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 Calian Group has rewarded shareholders with a total shareholder return of 12% in the last twelve months. Of course, that includes the dividend. However, that falls short of the 17% TSR per annum it has made for shareholders, each year, over five years. If you would like to research Calian Group in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.