Suncorp Group (ASX:SUN) jumps 3.2% this week, though earnings growth is still tracking behind three-year shareholder returns
One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. For example, Suncorp Group Limited (ASX:SUN) shareholders have seen the share price rise 64% over three years, well in excess of the market return (10%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 44% , including dividends .
On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.
See our latest analysis for Suncorp Group
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...' 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, Suncorp Group achieved compound earnings per share growth of 15% per year. We note that the 18% yearly (average) share price gain isn't too far from the EPS growth rate. Coincidence? Probably not. This suggests that sentiment and expectations have not changed drastically. Quite to the contrary, the share price has arguably reflected the EPS growth.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Suncorp Group has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
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. As it happens, Suncorp Group's TSR for the last 3 years was 89%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that Suncorp Group shareholders have received a total shareholder return of 44% over one year. That's including the dividend. That's better than the annualised return of 8% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Suncorp Group (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.
Of course Suncorp Group 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 Australian exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
