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By buying an index fund, investors can approximate the average market return. But if you choose individual stocks with prowess, you can make superior returns. Just take a look at FSE Services Group Limited (HKG:331), which is up 63%, over three years, soundly beating the market return of 23% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 34% in the last year, including dividends.
View our latest analysis for FSE Services Group
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, FSE Services Group achieved compound earnings per share growth of 3.6% per year. This EPS growth is lower than the 18% average annual increase in the share price. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It is quite common to see investors become enamoured with a business, after a few years of solid progress.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into FSE Services Group's key metrics by checking this interactive graph of FSE Services Group'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 or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of FSE Services Group, it has a TSR of 98% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We're pleased to report that FSE Services Group rewarded shareholders with a total shareholder return of 34% over the last year. That's including the dividend. That gain actually surpasses the 26% TSR it generated (per year) over three years. These improved returns may hint at some real business momentum, implying that now could be a great time to delve deeper. Importantly, we haven't analysed FSE Services Group's dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.