By buying an index fund, investors can approximate the average market return. But if you pick the right individual stocks, you could make more than that. For example, Evli Pankki Oyj (HEL:EVLI) shareholders have seen the share price rise 64% over three years, well in excess of the market return (13%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 47% in the last year , including dividends .
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. 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.
Over the last three years, Evli Pankki Oyj failed to grow earnings per share, which fell 3.3% (annualized).
Companies are not always focussed on EPS growth in the short term, and looking at how the share price has reacted, we don't think EPS is the most important metric for Evli Pankki Oyj at the moment. Therefore, it makes sense to look into other metrics.
Interestingly, the dividend has increased over time; so that may have given the share price a boost. It could be that the company is reaching maturity and dividend investors are buying for the yield. The revenue growth of about 5.0% per year might also encourage buyers.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Evli Pankki Oyj the TSR over the last 3 years was 96%, 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!
A Different Perspective
It's nice to see that Evli Pankki Oyj shareholders have gained 47% (in total) over the last year. That's including the dividend. That gain actually surpasses the 25% TSR it generated (per year) over three years. The improving returns to shareholders suggests the stock is becoming more popular with time. Importantly, we haven't analysed Evli Pankki Oyj's dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on FI exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.