Ansell's (ASX:ANN) investors will be pleased with their 13% return over the last year
These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But if you pick the right individual stocks, you could make more than that. To wit, the Ansell Limited (ASX:ANN) share price is 10% higher than it was a year ago, much better than the market decline of around 5.6% (not including dividends) in the same period. So that should have shareholders smiling. Unfortunately the longer term returns are not so good, with the stock falling 5.1% in the last three years.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
View our latest analysis for Ansell
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 the last year, Ansell actually saw its earnings per share drop 33%.
This means it's unlikely the market is judging the company based on earnings growth. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.
Unfortunately Ansell's fell 15% over twelve months. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for Ansell in this interactive graph of future profit estimates.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Ansell's TSR for the last 1 year was 13%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that Ansell shareholders have received a total shareholder return of 13% over the last year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 4%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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