Yahoo Finance Investing in Autosports Group (ASX:ASG) three years ago would have delivered you a 44% gain
By buying an index fund, investors can approximate the average market return. But if you pick the right individual stocks, you could make more than that. For example, the Autosports Group Limited (ASX:ASG) share price is up 28% in the last three years, clearly besting the market return of around 7.2% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 1.0% , including dividends .
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for Autosports Group
There is no denying that markets are sometimes efficient, but prices do not always reflect 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).
Autosports Group was able to grow its EPS at 68% per year over three years, sending the share price higher. The average annual share price increase of 9% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock. We'd venture the lowish P/E ratio of 7.81 also reflects the negative sentiment around the stock.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
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?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for Autosports Group the TSR over the last 3 years was 44%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's good to see that Autosports Group has rewarded shareholders with a total shareholder return of 1.0% in the last twelve months. Of course, that includes the dividend. However, that falls short of the 5% TSR per annum it has made for shareholders, each year, over five years. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 3 warning signs for Autosports Group (1 is potentially serious) that you should be aware of.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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