While Perenti Limited (ASX:PRN) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 13% in the last quarter. But over three years, the returns would have left most investors smiling To wit, the share price did better than an index fund, climbing 100% during that period.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for Perenti
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.
Perenti was able to grow its EPS at 448% per year over three years, sending the share price higher. This EPS growth is higher than the 26% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Perenti has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Perenti's financial health with this free report on its balance sheet.
What About The Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Perenti's total shareholder return (TSR) and its share price return. 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. Its history of dividend payouts mean that Perenti's TSR of 118% over the last 3 years is better than the share price return.
A Different Perspective
It's good to see that Perenti has rewarded shareholders with a total shareholder return of 53% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 8% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.