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Thanks in no small measure to Vanguard founder Jack Bogle, it's easy buy a low cost index fund, which should provide the average market return. But if you pick the right individual stocks, you could make more than that. Notably, the Las Vegas Sands Corp. (NYSE:LVS) share price has gained 42% in three years, which is better than the average market return. In contrast, the stock is actually down 13% in the last year, suggesting a lack of positive momentum.
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.
Over the last three years, Las Vegas Sands failed to grow earnings per share, which fell 4.1% (annualized). Based on these numbers, we think that the decline in earnings per share may not be a good representation of how the business has changed over the years. So other metrics may hold the key to understanding what is influencing investors.
We note that the dividend is higher than it was preciously, so that may have assisted the share price. Sometimes yield-chasing investors will flock to a company if they think the dividend can grow over time. The revenue growth of about 8.5% per year might also encourage buyers.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling Las Vegas Sands stock, you should check out this free report showing analyst profit forecasts.
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 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 Las Vegas Sands the TSR over the last 3 years was 64%, 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 gained around 8.7% in the last year, Las Vegas Sands shareholders lost 8.4% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 0.5%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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 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. Thank you for reading.