By purchasing an index fund, you can easily match market returns closely. However, if you choose the right individual stocks, you can earn even more. for example, Strategic Education Co., Ltd. (NASDAQ:STRA) shareholders have seen the share price rise 50% in three years, significantly outperforming the market return (8.1%, not including dividends). On the other hand, recent earnings haven't been very good, with shareholder returns including dividends at just 34%.
Last week proved favorable for Strategic Education investors, so let's take a look at whether the fundamentals have driven the company's three-year performance.
Check out our latest analysis on strategic education.
Although the efficient markets hypothesis continues to be taught by some, it has been proven that markets are dynamic systems that overreact and that investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Strategic Education was able to grow its EPS by 17% per year over three years, driving the share price higher. We don't think it's entirely a coincidence that the EPS growth rate is quite close to the average annual share price increase of 14%. This suggests that market sentiment surrounding the company hasn't changed much over that time. be againstthe change in stock price definitely mimics the growth in EPS.
The company's earnings per share (long-term) are depicted in the image below (click to see the exact numbers).
We know that strategic education revenues have improved recently, but will they grow? free A report showing analyst revenue forecasts can help determine whether EPS growth is sustainable.
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 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 increases and spin-offs. So for companies that pay a generous dividend, the TSR is often much higher than the share price return. We note that Strategic Education's TSR over the last three years was 65%, 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 Strategic Education shareholders have received a total shareholder return of 34% over one year. Of course, this includes dividends. There's no doubt that these recent returns are much better than the TSR loss of 3% per year over five years. This makes us a little wary, but the business may have turned its fortunes around. I think it's very interesting to look at stock price over the long term as an indicator of business performance. But to really gain insight, you need to consider other information as well. For example, we discovered that 1 Warning Sign for Strategic Education What you need to know before investing here.
However, please note: Strategic Education may not be the best stock to buy.So take a look at this free A list of interesting companies that have grown their earnings in the past (and are predicted to grow in the future).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
Valuation is complex, but we help make it simple.
Check out our comprehensive analysis to see if strategic education is potentially overvalued or undervalued, including: Fair value estimates, risks and caveats, dividends, insider trading, and financial health.
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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.
