These days it’s easy to simply buy an index fund, and your returns should (roughly) match the market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Amsterdam Commodities N.V. (AMS:ACOMO) share price is up 19% in the last year, clearly besting the market return of around 11% (not including dividends). So that should have shareholders smiling. However, the longer term returns haven’t been so impressive, with the stock up just 4.9% in the last three years.
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…’ 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 last year Amsterdam Commodities grew its earnings per share (EPS) by 2.4%. This EPS growth is significantly lower than the 19% increase in the share price. This indicates that the market is now more optimistic about the stock.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
This free interactive report on Amsterdam Commodities’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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. As it happens, Amsterdam Commodities’s TSR for the last year was 25%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It’s good to see that Amsterdam Commodities has rewarded shareholders with a total shareholder return of 25% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 6.7% per year), it would seem that the stock’s performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Keeping this in mind, a solid next step might be to take a look at Amsterdam Commodities’s dividend track record. This free interactive graph is a great place to start.
Of course Amsterdam Commodities may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NL exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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.
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