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Long term investing can be life changing when you buy and hold the truly great businesses. While not every stock performs well, when investors win, they can win big. Just think about the savvy investors who held PropNex Limited (SGX:OYY) shares for the last five years, while they gained 315%. This just goes to show the value creation that some businesses can achieve. It's also good to see the share price up 28% over the last quarter. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for PropNex
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, PropNex managed to grow its earnings per share at 15% a year. This EPS growth is slower than the share price growth of 33% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. 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).
Dive deeper into PropNex's key metrics by checking this interactive graph of PropNex's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of PropNex, it has a TSR of 483% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's nice to see that PropNex shareholders have received a total shareholder return of 34% over the last year. And that does include the dividend. Having said that, the five-year TSR of 42% a year, is even better. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with PropNex , and understanding them should be part of your investment process.