Yahoo Finance Severn Trent (LON:SVT) Shareholders Booked A 17% Gain In The Last Year
These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But you can significantly boost your returns by picking above-average stocks. For example, the Severn Trent Plc (LON:SVT) share price is up 17% in the last year, clearly besting the market decline of around 24% (not including dividends). So that should have shareholders smiling. Unfortunately the longer term returns are not so good, with the stock falling 0.6% in the last three years.
View our latest analysis for Severn Trent
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 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.
During the last year Severn Trent grew its earnings per share (EPS) by 14%. This EPS growth is reasonably close to the 17% increase in the share price. This makes us think the market hasn't really changed its sentiment around the company, in the last year. It makes intuitive sense that the share price and EPS would grow at similar rates.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Severn Trent has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
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 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. As it happens, Severn Trent's TSR for the last year was 23%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's nice to see that Severn Trent shareholders have received a total shareholder return of 23% over the last year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 5.6%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 1 warning sign for Severn Trent that you should be aware of before investing here.
But note: Severn Trent may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
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.
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.
