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By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the ANZ Group Holdings Limited (ASX:ANZ) share price is up 32% in the last three years, clearly besting the market return of around 16% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 13% , 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.
Check out our latest analysis for ANZ Group Holdings
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 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).
During three years of share price growth, ANZ Group Holdings achieved compound earnings per share growth of 13% per year. This EPS growth is higher than the 10% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 10.22.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into ANZ Group Holdings' key metrics by checking this interactive graph of ANZ Group Holdings's earnings, revenue and cash flow.
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. In the case of ANZ Group Holdings, it has a TSR of 56% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's nice to see that ANZ Group Holdings shareholders have received a total shareholder return of 13% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 1.6% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand ANZ Group Holdings better, we need to consider many other factors. Even so, be aware that ANZ Group Holdings is showing 2 warning signs in our investment analysis , and 1 of those is a bit concerning...