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While it may not be enough for some shareholders, we think it is good to see the Freightways Group Limited (NZSE:FRW) share price up 21% in a single quarter. But that cannot eclipse the less-than-impressive returns over the last three years. Truth be told the share price declined 25% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Freightways Group
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 the unfortunate three years of share price decline, Freightways Group actually saw its earnings per share (EPS) improve by 11% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.
It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.
Revenue is actually up 16% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching Freightways Group more closely, as sometimes stocks fall unfairly. This could present an opportunity.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
This free interactive report on Freightways Group's balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Freightways Group's TSR for the last 3 years was -15%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that Freightways Group shareholders have received a total shareholder return of 20% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 8%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Freightways Group better, we need to consider many other factors. Even so, be aware that Freightways Group is showing 2 warning signs in our investment analysis , you should know about...