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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, IntegraFin Holdings plc (LON:IHP) shareholders have seen the share price rise 91% over three years, well in excess of the market decline (0.2%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 14% , including dividends .
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 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.
IntegraFin Holdings was able to grow its EPS at 15% per year over three years, sending the share price higher. This EPS growth is lower than the 24% average annual increase in the share price. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It is quite common to see investors become enamoured with a business, after a few years of solid progress.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for IntegraFin Holdings the TSR over the last 3 years was 103%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
IntegraFin Holdings shareholders are up 14% for the year (even including dividends). While you don't go broke making a profit, this return was actually lower than the average market return of about 34%. But the (superior) three-year TSR of 27% per year is some consolation. Even the best companies don't see strong share price performance every year. It's always interesting to track share price performance over the longer term. But to understand IntegraFin Holdings better, we need to consider many other factors. Even so, be aware that IntegraFin Holdings is showing 1 warning sign in our investment analysis , you should know about...
We will like IntegraFin Holdings better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
This article by Simply Wall St is general in nature. 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.
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