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While not a mind-blowing move, it is good to see that the Port of Tauranga Limited (NZSE:POT) share price has gained 10% in the last three months. But that doesn't change the fact that the returns over the last three years have been less than pleasing. Truth be told the share price declined 13% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for Port of Tauranga
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 three years that the share price fell, Port of Tauranga's earnings per share (EPS) dropped by 4.3% each year. This change in EPS is reasonably close to the 5% average annual decrease in the share price. So it seems like sentiment towards the stock hasn't changed all that much over time. It seems like the share price is reflecting the declining earnings per share.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
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, Port of Tauranga's TSR for the last 3 years was -4.9%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Port of Tauranga shareholders gained a total return of 8.8% during the year. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 0.4% per year over five year. It is possible that returns will improve along with the business fundamentals. Before spending more time on Port of Tauranga it might be wise to click here to see if insiders have been buying or selling shares.