Yahoo Finance Standard Chartered's (LON:STAN) earnings growth rate lags the 15% CAGR delivered to shareholders
By buying an index fund, investors can approximate the average market return. But if you choose individual stocks with prowess, you can make superior returns. Just take a look at Standard Chartered PLC (LON:STAN), which is up 46%, over three years, soundly beating the market return of 19% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 10% in the last year , including dividends .
Since the long term performance has been good but there's been a recent pullback of 3.7%, let's check if the fundamentals match the share price.
See our latest analysis for Standard Chartered
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Standard Chartered was able to grow its EPS at 25% per year over three years, sending the share price higher. The average annual share price increase of 14% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.07.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Standard Chartered has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Standard Chartered's TSR for the last 3 years was 54%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's nice to see that Standard Chartered shareholders have received a total shareholder return of 10% over the last year. That's including the dividend. That certainly beats the loss of about 3% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand Standard Chartered better, we need to consider many other factors. For instance, we've identified 2 warning signs for Standard Chartered that you should be aware of.
But note: Standard Chartered may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British 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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