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Investing can be hard but the potential fo an individual stock to pay off big time inspires us. But when you hold the right stock for the right time period, the rewards can be truly huge. For example, the Bel Fuse Inc. (NASDAQ:BELF.A) share price is up a whopping 599% in the last three years, a handsome return for long term holders. It's also good to see the share price up 14% over the last quarter. But this move may well have been assisted by the reasonably buoyant market (up 13% in 90 days). It really delights us to see such great share price performance for investors.
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 Bel Fuse
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, Bel Fuse achieved compound earnings per share growth of 38% per year. In comparison, the 91% per year gain in the share price outpaces the EPS growth. So it's fair to assume the market has a higher opinion of the business than it did three years ago. It's not unusual to see the market 're-rate' a stock, after a few years of growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Bel Fuse'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. 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 Bel Fuse the TSR over the last 3 years was 613%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!