Investing in Julius Bär Gruppe (VTX:BAER) three years ago would have delivered you a 84% gain

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One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. Just take a look at Julius Bär Gruppe AG (VTX:BAER), which is up 67%, over three years, soundly beating the market return of 46% (not including dividends). On the other hand, the returns haven’t been quite so good recently, with shareholders up just 18% , including dividends .

Let’s take a look at the underlying fundamentals over the longer term, and see if they’ve been consistent with shareholders returns.

See our latest analysis for Julius Bär Gruppe

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and 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.

Julius Bär Gruppe was able to grow its EPS at 2.5% per year over three years, sending the share price higher. In comparison, the 19% per year gain in the share price outpaces the EPS growth. So it’s fair to assume the market has a higher opinion of the business than it did three years ago. It’s not unusual to see the market ‘re-rate’ a stock, after a few years of growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

SWX:BAER Earnings Per Share Growth January 6th 2022

We know that Julius Bär Gruppe has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Julius Bär Gruppe will grow revenue in the future.

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 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 raisings and spin-offs. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Julius Bär Gruppe’s TSR for the last 3 years was 84%, 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

Julius Bär Gruppe shareholders gained a total return of 18% during the year. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 9% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. Is Julius Bär Gruppe cheap compared to other companies? These 3 valuation measures might help you decide.

But note: Julius Bär Gruppe may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an 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 account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.