One simple way to benefit from the stock market is to buy an index fund. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the The Bidvest Group Limited (JSE:BVT) share price is up 46% in the last three years, clearly besting the market return of around 0.3% (not including dividends). On the other hand, the returns haven’t been quite so good recently, with shareholders up just 6.3% , including dividends .
Let’s take a look at the underlying fundamentals over the longer term, and see if they’ve been consistent with shareholders returns.
View our latest analysis for Bidvest Group
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
During three years of share price growth, Bidvest Group achieved compound earnings per share growth of 138% per year. The average annual share price increase of 14% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on 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 is of course excellent to see how Bidvest Group has grown profits over the years, but the future is more important for shareholders. 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 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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Bidvest Group, it has a TSR of 62% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It’s nice to see that Bidvest Group shareholders have received a total shareholder return of 6.3% over the last year. And that does include the dividend. However, the TSR over five years, coming in at 7% per year, is even more impressive. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 1 warning sign we’ve spotted with Bidvest Group .
We will like Bidvest Group 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 South African 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.
