Viva Energy Group's (ASX:VEA) 21% CAGR outpaced the company's earnings growth over the same three-year period
By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. For example, Viva Energy Group Limited (ASX:VEA) shareholders have seen the share price rise 30% over three years, well in excess of the market return (3.6%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 28% , including dividends .
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
See our latest analysis for Viva Energy Group
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
Viva Energy Group was able to grow its EPS at 8.0% per year over three years, sending the share price higher. We note that the 9% yearly (average) share price gain isn't too far from the EPS growth rate. Coincidence? Probably not. This observation indicates that the market's attitude to the business hasn't changed all that much. Rather, the share price has approximately tracked EPS growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Viva Energy Group has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Viva Energy Group's TSR for the last 3 years was 79%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We're pleased to report that Viva Energy Group rewarded shareholders with a total shareholder return of 28% over the last year. That includes the value of the dividend. That gain actually surpasses the 21% TSR it generated (per year) over three years. Given the track record of solid returns over varying time frames, it might be worth putting Viva Energy Group on your watchlist. 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. To that end, you should be aware of the 1 warning sign we've spotted with Viva Energy Group .
Of course Viva Energy Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
