When we invest, we're generally looking for stocks that outperform the market average. And in our experience, buying the right stocks can give your wealth a significant boost. For example, the Scandi Standard AB (publ) (STO:SCST) share price is up 62% in the last 5 years, clearly besting the market return of around 24% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 26% , including dividends .
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 five years of share price growth, Scandi Standard achieved compound earnings per share (EPS) growth of 32% per year. This EPS growth is higher than the 10% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Scandi Standard has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Scandi Standard, it has a TSR of 87% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Scandi Standard shareholders are up 26% for the year (even including dividends) . Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 13% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. It's always interesting to track share price performance over the longer term. But to understand Scandi Standard better, we need to consider many other factors. For instance, we've identified 2 warning signs for Scandi Standard that you should be aware of.
We will like Scandi Standard 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 SE 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.