In This Article:
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, the Ocean Wilsons Holdings Limited (LON:OCN) share price is up 40% in the last three years, clearly besting the market decline of around 2.5% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 12% in the last year, including dividends.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for Ocean Wilsons Holdings
There is no denying that markets are sometimes efficient, but prices do not always reflect 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 the three years of share price growth, Ocean Wilsons Holdings actually saw its earnings per share (EPS) drop 14% per year.
So we doubt that the market is looking to EPS for its main judge of the company's value. Given this situation, it makes sense to look at other metrics too.
Interestingly, the dividend has increased over time; so that may have given the share price a boost. It could be that the company is reaching maturity and dividend investors are buying for the yield. On top of that, revenue grew at a rate of 11% per year, and it's likely investors interpret that as pointing to a brighter future.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We know that Ocean Wilsons Holdings has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Ocean Wilsons Holdings will earn in the future (free profit forecasts).
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Ocean Wilsons Holdings, it has a TSR of 65% 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!