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The most you can lose on any stock (assuming you don’t use leverage) is 100% of your money. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! Take, for example AB Electrolux (publ) (STO:ELUX B). Its share price is already up an impressive 105% in the last twelve months. On top of that, the share price is up 24% in about a quarter. But this move may well have been assisted by the reasonably buoyant market (up 13% in 90 days). On the other hand, longer term shareholders have had a tougher run, with the stock falling 5.6% in three years.
See our latest analysis for AB Electrolux
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
AB Electrolux was able to grow EPS by 119% in the last twelve months. We note that the earnings per share growth isn’t far from the share price growth (of 105%). This makes us think the market hasn’t really changed its sentiment around the company, in the last year. It makes intuitive sense that the share price and EPS would grow at similar rates.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It’s good to see that there was some significant insider buying in the last three months. That’s a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, AB Electrolux’s TSR for the last year was 115%, which exceeds the share price return mentioned earlier. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It’s nice to see that AB Electrolux shareholders have received a total shareholder return of 115% over the last year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 9% per year), it would seem that the stock’s performance has improved in recent times. 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. Even so, be aware that AB Electrolux is showing 1 warning sign in our investment analysis , you should know about…
AB Electrolux is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SE 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.
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