Charter Hall Group (ASX:CHC) shareholders notch a 9.4% CAGR over 5 years, yet earnings have been shrinking
Stock pickers are generally looking for stocks that will outperform the broader market. Buying under-rated businesses is one path to excess returns. For example, long term Charter Hall Group (ASX:CHC) shareholders have enjoyed a 34% share price rise over the last half decade, well in excess of the market return of around 24% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 12% , including dividends .
Since it's been a strong week for Charter Hall Group shareholders, let's have a look at trend of the longer term fundamentals.
See our latest analysis for Charter Hall Group
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Charter Hall Group's earnings per share are down 25% per year, despite strong share price performance over five years.
This means it's unlikely the market is judging the company based on earnings growth. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.
On the other hand, Charter Hall Group's revenue is growing nicely, at a compound rate of 13% over the last five years. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling Charter Hall Group stock, you should check out this free report showing analyst profit forecasts.
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Charter Hall Group's TSR for the last 5 years was 57%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Charter Hall Group shareholders gained a total return of 12% during the year. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 9% over half a decade 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 Charter Hall Group better, we need to consider many other factors. For example, we've discovered 1 warning sign for Charter Hall Group that you should be aware of before investing here.
Charter Hall Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
