Passive investing in index funds can generate returns that roughly match the overall market. But you can do better than that by choosing better-than-average stocks (as part of a diversified portfolio). Namely, the Nutrien Ltd. The share price (TSE: NTR) is 46% higher than it was a year ago, much better than the market return of around 29% (excluding dividends) during the same period. If he can maintain this outperformance over the long term, investors will do very well! That said, long-term returns aren’t that impressive, with the stock only gaining 9.1% in three years.
So let’s take a look at the underlying fundamentals over the past year and see if they have moved in step with shareholder returns.
Check out our latest review for Nutrien
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.
Over the past year, Nutrien has increased its earnings per share (EPS) by 18%. The 46% share price gain certainly outpaced EPS growth. This indicates that the market is now more bullish on the stock.
The image below shows how EPS has tracked over time (if you click on the image you can see more detail).
It’s good to see that there have been some significant insider buys over the past three months. It’s positive. That said, we believe earnings and revenue growth trends are even more important factors to consider. Dive deeper into revenue by checking out this interactive income, revenue and cash flow graph from Nutrien.
What about dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 spinoff. Arguably, the TSR gives a more complete picture of the return generated by a stock. Note that for Nutrien the TSR over 1 year was 52%, which is better than the return on the share price mentioned above. And there’s no price guessing that dividend payments are a big reason for the discrepancy!
A different perspective
It’s nice to see that Nutrien shareholders have gained 52% (in total) over the past year. This includes the value of the dividend. This is better than the annualized TSR of 7% over the past three years. Given the track record of strong returns over varying time frames, it might be worth putting Nutrien on your watch list. While it is worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we have identified 4 warning signs for Nutrien (1 is potentially serious) that you should be aware of.
Nutrien isn’t the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider buys, might be just the ticket.
Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks that currently trade on CA exchanges.
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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 any of the stocks mentioned.
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