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One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. For example, Barnes Group Inc. (NYSE:B) shareholders have seen the share price rise 68% over three years, well in excess of the market return (41%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 2.7% in the last year, including dividends.
Check out our latest analysis for Barnes 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...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Barnes Group was able to grow its EPS at 12% per year over three years, sending the share price higher. In comparison, the 19% per year gain in the share price outpaces the EPS growth. 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).
We know that Barnes Group has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Barnes Group, it has a TSR of 73% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
Barnes Group provided a TSR of 2.7% over the last twelve months. But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 9.8% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. If you would like to research Barnes Group in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.