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One simple way to benefit from the stock market is to buy an index fund. But many of us dare to dream of bigger returns, and build a portfolio ourselves. Just take a look at Famur S.A. (WSE:FMF), which is up 81%, over three years, soundly beating the market return of 6.8% (not including dividends).
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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, Famur achieved compound earnings per share growth of 51% per year. The average annual share price increase of 22% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Famur has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Famur 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 or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Famur the TSR over the last 3 years was 98%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
While the broader market lost about 4.3% in the twelve months, Famur shareholders did even worse, losing 18% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 6.3% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before forming an opinion on Famur you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
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 PL 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.