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). For example, the Frontline Ltd. (NYSE:FRO) share price is up 62% in the last year, clearly besting the market return of around 1.4% (not including dividends). So that should have shareholders smiling. Also impressive, the stock is up 30% over three years, making long term shareholders happy, too.
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).
During the last year Frontline grew its earnings per share, moving from a loss to a profit.
The result looks like a strong improvement to us, so we're not surprised the market likes the growth. Inflection points like this can be a great time to take a closer look at a company.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Frontline 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 the Total Shareholder Return (TSR)?
We've already covered Frontline's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Frontline's TSR of 62% over the last year is better than the share price return.
A Different Perspective
Pleasingly, Frontline's total shareholder return last year was 62%. That gain actually surpasses the 12% TSR it generated (per year) over three years. These improved returns may hint at some real business momentum, implying that now could be a great time to delve deeper. Before forming an opinion on Frontline you might want to consider these 3 valuation metrics.
If you are like me, then you will 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 US 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 email@example.com. 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.