Avnet (NASDAQ:AVT) advances 7.0% this week, taking three-year gains to 100%
By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Avnet, Inc. (NASDAQ:AVT) share price is up 85% in the last three years, clearly besting the market return of around 35% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 23% in the last year , including dividends .
The past week has proven to be lucrative for Avnet investors, so let's see if fundamentals drove the company's three-year performance.
View our latest analysis for Avnet
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During three years of share price growth, Avnet moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Avnet has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Avnet stock, you should check out this FREE detailed report on its balance sheet.
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, Avnet's TSR for the last 3 years was 100%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Avnet has rewarded shareholders with a total shareholder return of 23% in the last twelve months. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 5% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 5 warning signs for Avnet (3 are a bit unpleasant!) that you should be aware of before investing here.
We will like Avnet 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 American 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.
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