Three-Year Orkla (OB: ORK) Profit Growth Below Shareholder Returns 11% YoY

You can get the average market return by purchasing a low cost index fund. But you can get higher returns by choosing above-average stocks. In particular, the Orkla ASA The stock price (OB: ORK) has gained 24% in three years, which is better than the average market return. Zooming in, the stock only rose 1.2% last year.

Given that the stock added SEK 3.1 billion to its market cap in the past week alone, let’s see if the underlying performance has generated any long-term returns.

See our latest review for Orkla

While the markets are a powerful pricing mechanism, stock prices reflect investor sentiment, not just underlying business performance. An imperfect but straightforward way to examine how a company’s market perception has changed is to compare the evolution of earnings per share (EPS) with the movement of the share price.

Over the three years of share price growth, Orkla has achieved growth in compound earnings per share of 10% per year. This EPS growth is greater than the 7% average annual increase in the share price. We could therefore reasonably conclude that the market has cooled on the title.

The company’s earnings per share (over time) is shown in the image below (click to see exact numbers).

OB: ORK Growth in earnings per share on December 13, 2021

We consider it positive that insiders have made significant purchases in the past year. Even so, future profits will be much more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a careful review of historical growth trends, available here.

What about dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. TSR is a yield calculation that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of any discounted capital increase and spin-off. Arguably, the TSR gives a more complete picture of the return generated by a stock. We note that for Orkla the TSR over the past 3 years was 37% which is better than the share price return mentioned above. This is largely the result of his dividend payments!

A different perspective

Orkla shareholders are up 4.7% over the year (including dividends). But it was below the market average. On the positive side, longer-term returns (around 7% per year, over half a decade) look better. It may well be that this is a company worth watching, given the consistently positive reception over time from the market. Investors who like to make money usually check insider buys, such as the price paid and the total amount bought. You can find out about Orkla Insider Buys by clicking on this link.

If you like to buy stocks alongside management then you might love this free list of companies. (Hint: insiders bought them).

Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks that are currently trading on NO stock exchange.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.

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