There's no doubt that investing in the stock market is a truly brilliant way to build wealth. But not every stock you buy will perform as well as the overall market. Over the last year the Intesa Sanpaolo S.p.A. (BIT:ISP) share price is up 18%, but that's less than the broader market return. On the other hand, longer term shareholders have had a tougher run, with the stock falling 7.6% in three years.
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.
Over the last twelve months, Intesa Sanpaolo actually shrank its EPS by 4.9%.
The mild decline in EPS may be a result of the fact that the company is more focused on other aspects of the business, right now. It makes sense to check some of the other fundamental data for an explanation of the share price rise.
We haven't seen Intesa Sanpaolo increase dividend payments yet, so the yield probably hasn't helped drive the share higher. Rather, we'd posit that the revenue increase of 3.0% might be more meaningful. After all, it's not necessarily a bad thing if a business sacrifices profits today in pursuit of profit tomorrow (metaphorically speaking).
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Intesa Sanpaolo is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Intesa Sanpaolo in this interactive graph of future profit estimates.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Intesa Sanpaolo the TSR over the last year was 29%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that Intesa Sanpaolo shareholders have received a total shareholder return of 29% over the last year. And that does include the dividend. That's better than the annualised return of 7.2% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Keeping this in mind, a solid next step might be to take a look at Intesa Sanpaolo's dividend track record. This free interactive graph is a great place to start.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IT exchanges.
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.
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