Diversification is a key tool for dealing with stock price volatility. Of course, the aim of the game is to pick stocks that do better than an index fund. Deluxe Corporation (NYSE:DLX) has done well over the last year, with the stock price up 37% beating the market return of 34% (not including dividends). On the other hand, longer term shareholders have had a tougher run, with the stock falling 29% in three years.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over the last twelve months Deluxe went from profitable to unprofitable. While some may see this as temporary, we're a skeptical bunch, and so we're a little surprised to see the share price go up. It may be that the company has done well on other metrics.
Revenue was pretty stable on last year, so deeper research might be needed to explain the share price rise.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
This free interactive report on Deluxe's balance sheet strength is a great place to start, if you want to investigate the stock further.
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. As it happens, Deluxe's TSR for the last year was 41%, 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 Deluxe has rewarded shareholders with a total shareholder return of 41% in the last twelve months. And that does include the dividend. That certainly beats the loss of about 2.2% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
We will like Deluxe 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 US exchanges.
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