While not a mind-blowing move, it is good to see that the Autoliv, Inc. (NYSE:ALV) share price has gained 13% in the last three months. But that cannot eclipse the less-than-impressive returns over the last three years. Truth be told the share price declined 21% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
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. 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 three years that the share price fell, Autoliv's earnings per share (EPS) dropped by 24% each year. This fall in the EPS is worse than the 7.6% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Autoliv's earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Autoliv the TSR over the last 3 years 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
Autoliv shareholders are up 1.3% for the year (even including dividends) . But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 6.0% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. Keeping this in mind, a solid next step might be to take a look at Autoliv's dividend track record. This free interactive graph is a great place to start.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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If you spot an error that warrants correction, please contact the editor at email@example.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.