If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. For example, the Outfront Media Inc. (NYSE:OUT) share price is up 50% in the last year, clearly besting the market return of around 8.9% (not including dividends). So that should have shareholders smiling. However, the stock hasn't done so well in the longer term, with the stock only up 24% in three years.
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. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the last year Outfront Media grew its earnings per share (EPS) by 79%. It's fair to say that the share price gain of 50% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about Outfront Media as it was before. This could be an opportunity.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Outfront Media has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Outfront Media's balance sheet strength is a great place to start, if you want to investigate the stock further.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Outfront Media, it has a TSR of 60% for the last year. 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
It's nice to see that Outfront Media shareholders have received a total shareholder return of 60% over the last year. That's including the dividend. That gain is better than the annual TSR over five years, which is 7.4%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Keeping this in mind, a solid next step might be to take a look at Outfront Media's dividend track record. This free interactive graph is a great place to start.
We will like Outfront Media 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 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 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.