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These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But you can significantly boost your returns by picking above-average stocks. To wit, the Ansell Limited (ASX:ANN) share price is 41% higher than it was a year ago, much better than the market return of around 15% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! Unfortunately the longer term returns are not so good, with the stock falling 7.0% in the last three years.
So let's assess the underlying fundamentals over the last 1 year and see if they've moved in lock-step with shareholder returns.
View our latest analysis for Ansell
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).
Over the last twelve months, Ansell actually shrank its EPS by 49%.
Given the share price gain, we doubt the market is measuring progress with EPS. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.
We are skeptical of the suggestion that the 1.8% dividend yield would entice buyers to the stock. Revenue was pretty stable on last year, so deeper research might be needed to explain the share price rise.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Ansell is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Ansell stock, you should check out this free report showing analyst consensus estimates for future profits.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Ansell the TSR over the last 1 year was 44%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that Ansell shareholders have received a total shareholder return of 44% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 6%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Ansell , and understanding them should be part of your investment process.