Yahoo Finance The three-year returns for Standard Chartered's (LON:STAN) shareholders have been favorable, yet its earnings growth was even better
By buying an index fund, investors can approximate the average market return. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, Standard Chartered PLC (LON:STAN) shareholders have seen the share price rise 39% over three years, well in excess of the market return (1.2%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 13% in the last year , including dividends .
On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.
Check out our latest analysis for Standard Chartered
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Standard Chartered was able to grow its EPS at 124% per year over three years, sending the share price higher. This EPS growth is higher than the 12% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock. We'd venture the lowish P/E ratio of 7.20 also reflects the negative sentiment around the stock.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Dive deeper into the earnings by checking this interactive graph of Standard Chartered'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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Standard Chartered, it has a TSR of 49% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that Standard Chartered shareholders have received a total shareholder return of 13% over one year. And that does include the dividend. That's better than the annualised return of 1.3% over half a decade, implying that the company is doing better recently. 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 Standard Chartered better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Standard Chartered , and understanding them should be part of your investment process.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
