Nasdaq
华尔街日报Colbún's (SNSE:COLBUN) 28% CAGR outpaced the company's earnings growth over the same three-year period
Low-cost index funds make it easy to achieve average market returns. But if you invest in individual stocks, some are likely to underperform. Unfortunately for shareholders, while the Colbún S.A. (SNSE:COLBUN) share price is up 70% in the last three years, that falls short of the market return. Having said that, the 23% increase over the past year is good to see.
The past week has proven to be lucrative for Colbún investors, so let's see if fundamentals drove the company's three-year performance.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Colbún was able to grow its EPS at 23% per year over three years, sending the share price higher. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 19% average annual increase in the share price. This suggests that sentiment and expectations have not changed drastically. Rather, the share price has approximately tracked EPS growth.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
This free interactive report on Colbún's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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, Colbún's TSR for the last 3 years was 110%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Colbún provided a TSR of 28% over the last twelve months. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 22% over half a decade It is possible that returns will improve along with the business fundamentals. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Colbún you should know about.
We will like Colbún better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chilean exchanges.
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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.