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Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. To wit, the Porvair share price has climbed 14% in five years, easily topping the market decline of 0.3% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 3.0% in the last year , including dividends .
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 Porvair
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.
Over half a decade, Porvair managed to grow its earnings per share at 9.3% a year. This EPS growth is higher than the 3% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Dive deeper into Porvair's key metrics by checking this interactive graph of Porvair's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Porvair's TSR for the last 5 years was 19%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Porvair shareholders are up 3.0% for the year (even including dividends). But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 4% over five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. If you would like to research Porvair in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.