Yahoo Finance K-Bro Linen's (TSE:KBL) investors will be pleased with their 29% return over the last year
Passive investing in index funds can generate returns that roughly match the overall market. But investors can boost returns by picking market-beating companies to own shares in. To wit, the K-Bro Linen Inc. (TSE:KBL) share price is 24% higher than it was a year ago, much better than the market return of around 3.2% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! On the other hand, longer term shareholders have had a tougher run, with the stock falling 14% in three years.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for K-Bro Linen
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the last year K-Bro Linen grew its earnings per share (EPS) by 351%. It's fair to say that the share price gain of 24% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about K-Bro Linen as it was before. This could be an opportunity.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that K-Bro Linen has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
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. In the case of K-Bro Linen, it has a TSR of 29% for the last 1 year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We're pleased to report that K-Bro Linen shareholders have received a total shareholder return of 29% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 1.8%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. If you would like to research K-Bro Linen in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
We will like K-Bro Linen better if we see some big insider buys. While we wait, check out this free list of growing companies 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 Canadian 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.
