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When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. For example, long term Briscoe Group Limited (NZSE:BGP) shareholders have enjoyed a 26% share price rise over the last half decade, well in excess of the market decline of around 6.6% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 8.8% in the last year, including dividends.
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
See our latest analysis for Briscoe Group
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.
Over half a decade, Briscoe Group managed to grow its earnings per share at 3.5% a year. This EPS growth is lower than the 5% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Briscoe Group's earnings, revenue and cash flow 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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Briscoe Group the TSR over the last 5 years was 67%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Briscoe Group provided a TSR of 8.8% over the last twelve months. Unfortunately this falls short of the market return. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 11% over five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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. Take risks, for example - Briscoe Group has 1 warning sign we think you should be aware of.