Yahoo Finance Shareholders Of Precinct Properties New Zealand (NZSE:PCT) Must Be Happy With Their 79% Return
The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share price rise faster than the market Unfortunately for shareholders, while the Precinct Properties New Zealand Limited (NZSE:PCT) share price is up 46% in the last five years, that's less than the market return. The last year has been disappointing, with the stock price down 11% in that time.
See our latest analysis for Precinct Properties New Zealand
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 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.
During five years of share price growth, Precinct Properties New Zealand actually saw its EPS drop 27% per year.
Essentially, it doesn't seem likely that investors are focused on EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
The revenue reduction of 2.2% per year is not a positive. It certainly surprises us that the share price is up, but perhaps a closer examination of the data will yield answers.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
This free interactive report on Precinct Properties New Zealand's balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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 Precinct Properties New Zealand, it has a TSR of 79% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Precinct Properties New Zealand shareholders are down 7.8% for the year (even including dividends), but the market itself is up 4.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 12%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 3 warning signs we've spotted with Precinct Properties New Zealand (including 1 which is is concerning) .
Of course Precinct Properties New Zealand may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NZ exchanges.
This article by Simply Wall St is general in nature. 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.
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