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One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. For example, the Senior plc (LON:SNR) share price is up 18% in the last three years, clearly besting the market return of around 3.5% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 5.0%, including dividends.
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 Senior
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During three years of share price growth, Senior moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Senior has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Senior stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Senior the TSR over the last 3 years was 21%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Senior shareholders are up 5.0% for the year (even including dividends). Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 0.9% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. If you would like to research Senior in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.