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While not a mind-blowing move, it is good to see that the Portmeirion Group PLC (LON:PMP) share price has gained 24% in the last three months. But if you look at the last five years the returns have not been good. After all, the share price is down 47% in that time, significantly under-performing the market.
View our latest analysis for Portmeirion Group
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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the five years over which the share price declined, Portmeirion Group's earnings per share (EPS) dropped by 12% each year. In this case, the EPS change is really very close to the share price drop of 12% a year. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price has approximately tracked EPS growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Portmeirion Group's total shareholder return (TSR) and its share price change, which we've covered above. 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. Dividends have been really beneficial for Portmeirion Group shareholders, and that cash payout explains why its total shareholder loss of 40%, over the last 5 years, isn't as bad as the share price return.
A Different Perspective
We're pleased to report that Portmeirion Group shareholders have received a total shareholder return of 17% over one year. There's no doubt those recent returns are much better than the TSR loss of 7% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Portmeirion Group better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Portmeirion Group , and understanding them should be part of your investment process.