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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on a lighter note, a good company can see its share price rise well over 100%. Long term Premier Investments Limited (ASX:PMV) shareholders would be well aware of this, since the stock is up 117% in five years. Also pleasing for shareholders was the 16% gain in the last three months.
Since the long term performance has been good but there's been a recent pullback of 3.4%, let's check if the fundamentals match the share price.
Check out our latest analysis for Premier Investments
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 five years of share price growth, Premier Investments achieved compound earnings per share (EPS) growth of 24% per year. This EPS growth is higher than the 17% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Dive deeper into Premier Investments' key metrics by checking this interactive graph of Premier Investments's earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Premier Investments the TSR over the last 5 years was 168%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We're pleased to report that Premier Investments shareholders have received a total shareholder return of 39% over one year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 22% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Keeping this in mind, a solid next step might be to take a look at Premier Investments' dividend track record. This free interactive graph is a great place to start.