Passive investing in index funds can generate returns that roughly match the overall market. But you can significantly boost your returns by picking above-average stocks. For example, the Monro, Inc. (NASDAQ:MNRO) share price is up 55% in the last year, clearly besting than the market return of around 5.9% (not including dividends). So that should have shareholders smiling. The longer term returns have not been as good, with the stock price only 23% higher than it was three years ago.
There is no denying that markets are sometimes efficient, but prices do not always reflect 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.
During the last year Monro grew its earnings per share (EPS) by 42%. The share price gain of 55% certainly outpaced the EPS growth. This indicates that the market is now more optimistic about the stock.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Monro has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Monro will grow revenue in the future.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Monro's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Monro's TSR of 56% for the year exceeded its share price return, because it has paid dividends.
A Different Perspective
It's nice to see that Monro shareholders have received a total shareholder return of 56% over the last year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 9.4% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Before spending more time on Monro it might be wise to click here to see if insiders have been buying or selling shares.
Of course Monro 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.
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.