Those who invested in SFS Group (VTX: SFSN) five years ago are up 83%

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Stock pickers typically look for stocks that will outperform the overall market. And while active security selection comes with risk (and requires diversification), it can also generate excess returns. For example, long term SFS SA Group Shareholders (VTX: SFSN) have benefited from a 66% share price increase over the past five years, well above the market yield of around 32% (excluding dividends). In contrast, the most recent gains have not been as impressive, with shareholders earning just 39% including dividends.

Now, it’s worth looking at the fundamentals of the business as well, as this will help us determine whether the long-term return to shareholders matches the performance of the underlying business.

Check out our latest analysis for the SFS group

To paraphrase Benjamin Graham: In the short term the market is a voting machine, but in the long term it is a weighing machine. By comparing earnings per share (EPS) and changes in the share price over time, we can get a sense of how investors’ attitudes towards a company have changed over time.

In five years, SFS Group has managed to increase its earnings per share by 17% per year. This EPS growth is greater than the average annual increase of 11% in the share price. So it looks like the market isn’t so keen on the stock these days.

You can see how EPS has changed over time in the image below (click on the graph to see the exact values).

SWX: SFSN Growth in earnings per share September 29, 2021

We know that the SFS group has improved its results lately, but will it increase its turnover? You could check that out free report showing analysts’ earnings forecasts.

What about dividends?

When considering investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. TSR is a yield calculation that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of any discounted capital increase and spinoff. Arguably, the TSR gives a more complete picture of the return generated by a stock. Note that for the SFS Group, the TSR over the last 5 years was 83%, which is better than the return on the share price mentioned above. The dividends paid by the company thus boosted the total shareholder return.

A different perspective

We are pleased to announce that SFS Group shareholders received a total shareholder return of 39% over one year. This includes the dividend. As the 1-year TSR is better than the 5-year TSR (the latter standing at 13% per year), it seems that the stock’s performance has improved in recent times. Someone with an optimistic outlook might view the recent improvement in TSR as indicating that the business itself is improving over time. While it is worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To this end, you should inquire about the 2 warning signs we spotted with SFS Group (including 1 which is a bit worrying).

If you like to buy stocks alongside management then you might love this free list of companies. (Hint: insiders bought them).

Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently traded on the CH exchanges.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.

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