By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. For example, Waste Connections, Inc. (NYSE:WCN) shareholders have seen the share price rise 88% over three years, well in excess of the market return (34%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 24% , including dividends .
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During three years of share price growth, Waste Connections moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Waste Connections the TSR over the last 3 years was 92%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Pleasingly, Waste Connections's total shareholder return last year was 24%. And yes, that does include the dividend. The TSR has been even better over three years, coming in at 24% per year. If you would like to research Waste Connections in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
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 firstname.lastname@example.org. 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.