Yahoo Finance The total return for Power Corporation of Canada (TSE:POW) investors has risen faster than earnings growth over the last three years
One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. For example, Power Corporation of Canada (TSE:POW) shareholders have seen the share price rise 56% over three years, well in excess of the market return (31%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 37% in the last year , including dividends .
Since the long term performance has been good but there's been a recent pullback of 5.9%, let's check if the fundamentals match the share price.
View our latest analysis for Power Corporation of Canada
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Power Corporation of Canada was able to grow its EPS at 17% per year over three years, sending the share price higher. Notably, the 16% average annual share price gain matches up nicely with the EPS growth rate. This suggests that sentiment and expectations have not changed drastically. Rather, the share price has approximately tracked EPS growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Power Corporation of Canada's earnings, revenue and cash flow.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Power Corporation of Canada, it has a TSR of 88% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Power Corporation of Canada has rewarded shareholders with a total shareholder return of 37% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 12% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Power Corporation of Canada better, we need to consider many other factors. For instance, we've identified 1 warning sign for Power Corporation of Canada that you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA 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.
