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The main aim of stock picking is to find the market-beating stocks. But even the best stock picker will only win with some selections. So we wouldn't blame long term Djerriwarrh Investments Limited (ASX:DJW) shareholders for doubting their decision to hold, with the stock down 13% over a half decade.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
Check out our latest analysis for Djerriwarrh Investments
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.
Looking back five years, both Djerriwarrh Investments' share price and EPS declined; the latter at a rate of 10% per year. The share price decline of 3% per year isn't as bad as the EPS decline. So investors might expect EPS to bounce back -- or they may have previously foreseen the EPS decline.
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 Djerriwarrh Investments' key metrics by checking this interactive graph of Djerriwarrh Investments'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. 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 Djerriwarrh Investments, it has a TSR of 9.8% 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
Djerriwarrh Investments shareholders are up 9.6% for the year (even including dividends). Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 1.9% per year over five year. This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand Djerriwarrh Investments better, we need to consider many other factors. Even so, be aware that Djerriwarrh Investments is showing 3 warning signs in our investment analysis , and 1 of those can't be ignored...