Earnings growth outpaced the impressive 113% return delivered to ZIM Integrated Shipping Services (NYSE:ZIM) shareholders over the last year
The simplest way to invest in stocks is to buy exchange traded funds. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the ZIM Integrated Shipping Services Ltd. (NYSE:ZIM) share price is 56% higher than it was a year ago, much better than the market decline of around 8.1% (not including dividends) in the same period. So that should have shareholders smiling. ZIM Integrated Shipping Services hasn't been listed for long, so it's still not clear if it is a long term winner.
On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.
See our latest analysis for ZIM Integrated Shipping Services
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
ZIM Integrated Shipping Services boasted truly magnificent EPS growth in the last year. This remarkable growth rate may not be sustainable, but it is still impressive. We are not surprised the share price is up. To us, inflection points like this are the best time to take a close look at a stock.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It is of course excellent to see how ZIM Integrated Shipping Services has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at ZIM Integrated Shipping Services' financial health with this free report on its balance sheet.
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. As it happens, ZIM Integrated Shipping Services' TSR for the last 1 year was 113%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that ZIM Integrated Shipping Services shareholders have gained 113% over the last year, including dividends. We regret to report that the share price is down 9.6% over ninety days. It may simply be that the share price got ahead of itself, although there may have been fundamental developments that are weighing on it. It's always interesting to track share price performance over the longer term. But to understand ZIM Integrated Shipping Services better, we need to consider many other factors. For example, we've discovered 4 warning signs for ZIM Integrated Shipping Services (1 doesn't sit too well with us!) that you should be aware of before investing here.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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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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.
