By purchasing an index fund, investors can approximate the average return of the market. However, many of us dare to dream of big returns and build our own portfolios. Take a look at Implenia AG (VTX:IMPN). This is an increase of 69% over three years, significantly outpacing the market decline of 4.8% (not including dividends). On the other hand, recent returns haven’t been that great, with shareholder returns at just 25%, including dividends.
Let’s look at the underlying fundamentals over the long term and see if they are aligned with shareholder returns.
Check out our latest analysis for Imprenia
Although the efficient markets hypothesis continues to be taught by some, it has been proven that markets are dynamic systems that overreact and that investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can learn how investor attitudes to a company have changed over time.
During three years of stock price growth, Imprenia went from a loss to a profit. This is generally considered a positive, so the stock price is expected to rise.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Growth rate of earnings per share
Of course, it’s great to see how Implenia has grown its profits over the years, but the future is more important to shareholders. This free interactive graphic shows how its balance sheet has strengthened (or weakened) over time.
What will happen to the dividend?
When looking at investment returns, it’s important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often much higher than the share price return. We note that Implenia’s TSR over the last three years was 74%, which is better than the share price return mentioned above. And there’s no kudos to speculating that dividend payments are the main explanation for the divergence.
different perspective
It’s good to see that Implenia returned a total return of 25% to shareholders in the over the last twelve months. Of course, this includes dividends. Notably, the five-year annualized TSR loss is 2% per year, which compares very unfavorably to the recent share price performance. Long-term losses make us cautious, but short-term TSR increases certainly suggest a bright future. It’s always interesting to track stock performance over the long term. However, to better understand imprenia, many other factors need to be considered. For example, consider risk. Implenia has 3 warning signs (and 1 is concerning) we think you should be aware of.
story continues
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: Many of them are under the radar and have attractive reviews).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Swiss 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 using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
