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By buying an index fund, you can roughly match the market return with ease. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, Kforce Inc. (NASDAQ:KFRC) shareholders have seen the share price rise 68% over three years, well in excess of the market return (39%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 9.0% , including dividends .
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 three years of share price growth, Kforce achieved compound earnings per share growth of 20% per year. This EPS growth is remarkably close to the 19% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price has approximately tracked EPS growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Kforce has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Kforce will grow revenue in the future.
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Kforce the TSR over the last 3 years was 79%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Kforce shareholders gained a total return of 9.0% during the year. But that was short of the market average. If we look back over five years, the returns are even better, coming in at 13% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand Kforce better, we need to consider many other factors. For instance, we've identified 3 warning signs for Kforce that you should be aware of.
Of course Kforce 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.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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