By buying an index fund, investors can approximate the average market return. But many of us dare to dream of bigger returns, and build a portfolio ourselves. Just take a look at GasLog Ltd. (NYSE:GLOG), which is up 59%, over three years, soundly beating the market return of 38% (not including dividends). However, more recent returns haven’t been as impressive as that, with the stock returning just 2.4% in the last year, including dividends.
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 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.
During three years of share price growth, GasLog achieved compound earnings per share growth of 121% per year. The average annual share price increase of 17% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how GasLog has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling GasLog stock, you should check out this FREE detailed 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). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for GasLog the TSR over the last 3 years was 81%, which is better than the share price return mentioned above. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
GasLog provided a TSR of 2.4% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, that’s still a gain, and it is certainly better than the yearly loss of about 2.8% endured over half a decade. It could well be that the business is stabilizing. Before forming an opinion on GasLog you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
Of course GasLog may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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.