Yahoo Finance Should Grifols Be Disappointed With Their 17% Profit?
One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. For example, Grifols, S.A. (BME:GRF) shareholders have seen the share price rise 17% over three years, well in excess of the market return (8.2%, not including dividends). On the other hand, the returns haven’t been quite so good recently, with shareholders up just 9.8%, including dividends.
View our latest analysis for Grifols
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.
Grifols was able to grow its EPS at 3.8% per year over three years, sending the share price higher. In comparison, the 5.4% per year gain in the share price outpaces the EPS growth. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It’s not unusual to see the market ‘re-rate’ a stock, after a few years of growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Grifols’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Grifols’s TSR for the last 3 years was 21%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We’re pleased to report that Grifols shareholders have received a total shareholder return of 9.8% over one year. That’s including the dividend. That’s better than the annualised return of 3.9% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on ES exchanges.
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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Thank you for reading.
