In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in Aktia Pankki Oyj (HEL:AKTIA), since the last five years saw the share price fall 11%.
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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
While the share price declined over five years, Aktia Pankki Oyj actually managed to increase EPS by an average of 0.6% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past. Given that EPS has increased, but the share price has fallen, it's fair to say that market sentiment around the stock has become more negative. Having said that, if the EPS gains continue we'd expect the share price to improve, longer term.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Aktia Pankki Oyj'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). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Aktia Pankki Oyj's TSR for the last 5 years was 20%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that Aktia Pankki Oyj shareholders have received a total shareholder return of 2.6% over the last year. Of course, that includes the dividend. Having said that, the five-year TSR of 3.7% a year, is even better. Keeping this in mind, a solid next step might be to take a look at Aktia Pankki Oyj's dividend track record. This free interactive graph is a great place to start.
But note: Aktia Pankki Oyj may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on FI exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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. Thank you for reading.