Passive investing in index funds can generate returns that are about the same as the overall market. However, if you choose the right individual stocks, you can earn even more. for example, foxtons group plc (LON:FOXT)'s share price is up 31% over the past year, clearly outperforming the market return of around 2.7% (not including dividends). If it can sustain that outperformance over time, investors will do very well. On the other hand, long-term shareholders' management has become even more difficult, and the stock price has fallen 17% in three years.
With that in mind, it's worth checking whether a company's underlying fundamentals are driving its long-term performance, or if there are any discrepancies.
Check out our latest analysis for Foxtons Group.
Markets are powerful pricing mechanisms, but stock prices reflect not only underlying business performance but also investor sentiment. One imperfect but simple way to consider how the market perception of a company has changed is to compare the change in the earnings per share (EPS) with the share price movement.
Over the last twelve months, Foxtons Group's EPS actually decreased by 40%.
Given the rise in the share price, we don't think the market appreciates the progress in EPS. Since changes in EPS don't seem to correlate with changes in share price, it's worth looking at other metrics.
I don't think the modest dividend yield of 1.7% is supporting the stock price. However, the 4.8% year-over-year revenue growth should help. We do see some companies suppressing earnings in order to accelerate revenue growth.
The company's earnings and revenue (long-term) are depicted in the image below (click to see the exact numbers).
We know that Foxtons Group has improved its earnings over the past three years, but what does the future hold for it? How has its balance sheet strengthened (or weakened) over time? I understand. free Interactive graphics.
What will happen to the dividend?
When looking at return on investment, it is important to consider the following differences: Total shareholder return (TSR) and stock 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. Coincidentally, Foxtons Group's TSR over the past year was 34%, 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
We're pleased to report that Foxtons Group shareholders received a total shareholder return of 34% over one year. Of course, this includes dividends. This is certainly higher than the annual loss of about 3% over the past five years. While we typically value long-term performance over short-term performance, recent improvements may signal a (positive) inflection point within the business. It's always interesting to track stock performance over the long term. But to understand Foxtons Group better, we need to consider many other factors. For example, we identified 1 warning sign for Foxtons Group What you need to know.
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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on UK 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.
