On average, over time, stock markets tend to rise higher. This makes investing attractive. But not every stock you buy will perform as well as the overall market. Unfortunately for shareholders, while the Wells Fargo & Company (NYSE:WFC) share price is up 23% in the last year, that falls short of the market return. In contrast, the longer term returns are negative, since the share price is 3.8% lower than it was three years ago.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Wells Fargo was able to grow EPS by 9.8% in the last twelve months. This EPS growth is significantly lower than the 23% increase in the share price. This indicates that the market is now more optimistic about the stock.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It might be well worthwhile taking a look at our free report on Wells Fargo's earnings, revenue and cash flow.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Wells Fargo, it has a TSR of 28% for the last year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
Wells Fargo provided a TSR of 28% over the last twelve months. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 2.4% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
But note: Wells Fargo may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
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