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If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. For example, the Amica S.A. (WSE:AMC) share price is up 78% in the last year, clearly besting the market return of around 46% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! The longer term returns have not been as good, with the stock price only 14% higher than it was three years ago.
See our latest analysis for Amica
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).
Amica was able to grow EPS by 30% in the last twelve months. The share price gain of 78% certainly outpaced the EPS growth. This indicates that the market is now more optimistic about the stock.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Amica has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Amica will grow revenue in the future.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Amica, it has a TSR of 81% for the last year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It’s good to see that Amica has rewarded shareholders with a total shareholder return of 81% in the last twelve months. And that does include the dividend. That’s better than the annualised return of 0.2% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we’ve identified 1 warning sign for Amica that you should be aware of.
Of course Amica 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 PL exchanges.
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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
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