These days it’s easy to simply buy an index fund, and your returns should (roughly) match the market. But you can significantly boost your returns by picking above-average stocks. For example, the Napier Port Holdings Limited (NZSE:NPH) share price is up 30% in the last 1 year, clearly besting the market return of around 2.2% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! Having said that, the longer term returns aren’t so impressive, with stock gaining just 6.7% in three years.
So let’s investigate and see if the longer term performance of the company has been in line with the underlying business’ progress.
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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Napier Port Holdings was able to grow EPS by 25% in the last twelve months. This EPS growth is reasonably close to the 30% increase in the share price. This makes us think the market hasn’t really changed its sentiment around the company, in the last year. We don’t think its coincidental that the share price is growing at a similar rate to the earnings per share.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Napier Port Holdings has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Napier Port Holdings’ TSR for the last 1 year was 37%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
It’s nice to see that Napier Port Holdings shareholders have received a total shareholder return of 37% over the last year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 1.7%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. For example, we’ve discovered 1 warning sign for Napier Port Holdings that you should be aware of before investing here.