One simple way to benefit from the stock market is to buy an index fund. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, WVS Financial Corp. (NASDAQ:WVFC) shareholders have seen the share price rise 53% over three years, well in excess of the market return (38%, not including dividends). On the other hand, the returns haven’t been quite so good recently, with shareholders up just 8.3%, including dividends.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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.
WVS Financial was able to grow its EPS at 27% per year over three years, sending the share price higher. This EPS growth is higher than the 15% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 11.76.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into WVS Financial’s key metrics by checking this interactive graph of WVS Financial’s earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, WVS Financial’s TSR for the last 3 years was 62%, which exceeds the share price return mentioned earlier. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We’re pleased to report that WVS Financial shareholders have received a total shareholder return of 8.3% over one year. And that does include the dividend. However, the TSR over five years, coming in at 10% per year, is even more impressive. Is WVS Financial cheap compared to other companies? These 3 valuation measures might help you decide.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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.