The simplest way to invest in stocks is to buy exchange traded funds. But you can significantly boost your returns by picking above-average stocks. For example, the Viva Energy Group Limited (ASX:VEA) share price is up 34% in the last 1 year, clearly besting the market return of around 6.1% (not including dividends). That’s a solid performance by our standards! On the other hand, longer term shareholders have had a tougher run, with the stock falling 14% in three years.

On the back of a solid 7-day performance, let’s check what role the company’s fundamentals have played in driving long term shareholder returns.

View our latest analysis for Viva Energy Group

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).

During the last year Viva Energy Group grew its earnings per share, moving from a loss to a profit.

When a company is just on the edge of profitability it can be well worth considering other metrics in order to more precisely gauge growth (and therefore understand share price movements).

Unfortunately Viva Energy Group’s fell 15% over twelve months. So the fundamental metrics don’t provide an obvious explanation for the share price gain.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
ASX:VEA Earnings and Revenue Growth February 14th 2022

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. You can see what analysts are predicting for Viva Energy Group in this interactive graph of future profit estimates.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Viva Energy Group’s TSR for the last 1 year was 40%, 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 Viva Energy Group shareholders have gained 40% (in total) over the last year. That’s including the dividend. So this year’s TSR was actually better than the three-year TSR (annualized) of 5%. 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. Consider risks, for instance. Every company has them, and we’ve spotted 2 warning signs for Viva Energy Group you should know about.

Viva Energy Group is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.

Extracted in full from: Viva Energy Group (ASX:VEA) stock performs better than its underlying earnings growth over last year – Simply Wall St News

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