There's no doubt that investing in the stock market is a truly brilliant way to build wealth. But if you choose that path, you're going to buy some stocks that fall short of the market. For example, the Asset Plus Limited (NZSE:APL), share price is up over the last year, but its gain of 11% trails the market return. Zooming out, the stock is actually down 1.5% in the last three years.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, Asset Plus actually saw its earnings per share drop 33%.
This means it's unlikely the market is judging the company based on earnings growth. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.
Absent any improvement, we don't think a thirst for dividends is pushing up the Asset Plus's share price. Revenue actually dropped 15% over last year. Usually that correlates with a lower share price, but let's face it, the gyrations of the market are sometimes only as clear as mud.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
If you are thinking of buying or selling Asset Plus stock, you should check out this FREE detailed report on its balance sheet.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Asset Plus the TSR over the last year was 18%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Asset Plus provided a TSR of 18% over the last twelve months. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 6.3% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. Keeping this in mind, a solid next step might be to take a look at Asset Plus's dividend track record. This free interactive graph is a great place to start.
But note: Asset Plus 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 NZ 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.