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By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Channel Infrastructure NZ Limited (NZSE:CHI) share price is up 94% in the last three years, clearly besting the market decline of around 9.1% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 47% in the last year, including dividends.
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.
Check out our latest analysis for Channel Infrastructure NZ
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.
Channel Infrastructure NZ became profitable within the last three years. So we would expect a higher share price over the period.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It is of course excellent to see how Channel Infrastructure NZ has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Channel Infrastructure NZ's financial health with this free report on its balance sheet.
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. We note that for Channel Infrastructure NZ the TSR over the last 3 years was 132%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that Channel Infrastructure NZ shareholders have received a total shareholder return of 47% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 16%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with Channel Infrastructure NZ .