Buying stocks in the best companies can create significant wealth for you and your family. And we’ve seen some really amazing gains over the years. You do not believe it ? Then watch the Avanza Bank Holding AB (released) (STO: AZA) share price. This is 377% more than five years ago. It just shows the value creation that some companies can achieve. On top of that, the share price rose 31% in about a quarter.

The past week has turned out to be lucrative for investors at Avanza Bank Holding, so let’s see if fundamentals have boosted the company’s performance over five years.

See our latest analysis for Avanza Bank Holding

To quote Buffett, “Ships will sail around the world but the Flat Earth Society will thrive. There will continue to be wide spreads between price and value in the market … ‘An imperfect but straightforward way to examine how a company’s market perception has changed is to compare the evolution of earnings per share (BPA) with the price movement action.

In five years, Avanza Bank Holding has managed to increase its earnings per share by 34% per year. The EPS growth rate is therefore quite close to the annualized price gain of 37% per year. Therefore, one could conclude that sentiment towards stocks has not changed much. In fact, the share price appears to largely reflect the growth in BPA.

The graph below illustrates the evolution of EPS over time (reveal the exact values ​​by clicking on the image).

We love that insiders have bought stocks in the past twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide for the business. This free Avanza Bank Holding’s interactive Profit, Revenue and Cash Flow report is a great place to start if you want to delve deeper into the stock market.

What about dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any discounted demerger or capital increase, as well as any dividend, based on the assumption that dividends are reinvested. It’s fair to say that the TSR gives a more complete picture of dividend paying stocks. In the case of Avanza Bank Holding, it has a TSR of 435% for the last 5 years. This exceeds the return on its share price that we mentioned earlier. This is largely the result of his dividend payments!

A different perspective

It is nice to see that the shareholders of Avanza Bank Holding have received a total shareholder return of 68% over the past year. Of course, this includes the dividend. This is better than the 40% annualized return over half a decade, which implies that the company has been doing better recently. Someone with an optimistic outlook might view the recent improvement in TSR as indicating that the business itself is improving over time. I find it very interesting to look at the long-term share price as an indicator of company performance. But to really get an overview, we have to take other information into account as well. To this end, you should inquire about the 2 warning signs we spotted with Avanza Bank Holding (including 1 which does not suit us too much).

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 currently traded on the SE exchanges.

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 shares 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 the mentioned stocks.

Do you have any feedback on this item? Are you worried about the content? Get in touch with us directly. You can also send an email to the editorial team (at) simplywallst.com.