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. Just take a look at Deneb Investments Limited (JSE:DNB), which is up 64%, over three years, soundly beating the market decline of 2.6% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 11% , including dividends .
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for Deneb Investments
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.
Deneb Investments became profitable within the last three years. That would generally be considered a positive, so we'd expect the share price to be up.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It might be well worthwhile taking a look at our free report on Deneb Investments' earnings, revenue and cash flow.
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. As it happens, Deneb Investments' TSR for the last 3 years was 87%, 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
It's nice to see that Deneb Investments shareholders have received a total shareholder return of 11% over the last year. That's including the dividend. That's better than the annualised return of 4% 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. For example, we've discovered 4 warning signs for Deneb Investments (1 is potentially serious!) that you should be aware of before investing here.