One way to deal with stock volatility is to ensure you have a properly diverse portfolio. But the goal is to pick stocks that do better than average. Fidelity National Financial, Inc. (NYSE:FNF) has done well over the last year, with the stock price up 37% beating the market return of 32% (not including dividends). However, the longer term returns haven't been so impressive, with the stock up just 19% in the last three years.
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Fidelity National Financial was able to grow EPS by 29% in the last twelve months. This EPS growth is significantly lower than the 37% increase in the share price. This indicates that the market is now more optimistic about the stock.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Fidelity National Financial has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Fidelity National Financial 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Fidelity National Financial, it has a TSR of 43% for the last 1 year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that Fidelity National Financial shareholders have received a total shareholder return of 43% over the last year. That's including the dividend. That's better than the annualised return of 10% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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 1 warning sign for Fidelity National Financial you should know about.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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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.
