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By buying an index fund, investors can approximate the average market return. But if you choose individual stocks with prowess, you can make superior returns. For example, Helios Underwriting plc (LON:HUW) shareholders have seen the share price rise 19% over three years, well in excess of the market decline (8.1%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 4.8% , including dividends .
So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.
See our latest analysis for Helios Underwriting
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.
During the three years of share price growth, Helios Underwriting actually saw its earnings per share (EPS) drop 53% per year.
So we doubt that the market is looking to EPS for its main judge of the company's value. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
Languishing at just 1.9%, we doubt the dividend is doing much to prop up the share price. It could be that the revenue growth of 23% per year is viewed as evidence that Helios Underwriting is growing. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. So it makes a lot of sense to check out what analysts think Helios Underwriting will earn in the future (free profit forecasts).
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 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. In the case of Helios Underwriting, it has a TSR of 28% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!