One simple way to benefit from the stock market is to buy an index fund. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, Cementir Holding S.p.A. (BIT:CEM) shareholders have seen the share price rise 62% over three years, well in excess of the market return (23%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 27% in the last year , including dividends .
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Cementir Holding was able to grow its EPS at 18% per year over three years, sending the share price higher. This EPS growth is remarkably close to the 17% average annual increase in the share price. This observation indicates that the market's attitude to the business hasn't changed all that much. Quite to the contrary, the share price has arguably reflected the EPS growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Cementir Holding'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. 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 Cementir Holding, it has a TSR of 72% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Cementir Holding shareholders have received returns of 27% over twelve months (even including dividends) , which isn't far from the general market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 7.3% per year. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Cementir Holding by clicking this link.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IT exchanges.
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.
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. Thank you for reading.