Polypipe Group plc (LON:PLP) shareholders might be concerned after seeing the share price drop 10% in the last quarter. But that doesn't change the fact that the returns over the last five years have been pleasing. After all, the share price is up a market-beating 52% in that time.
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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During five years of share price growth, Polypipe Group achieved compound earnings per share (EPS) growth of 42% per year. The EPS growth is more impressive than the yearly share price gain of 8.8% over the same period. So one could conclude that the broader market has become more cautious towards the stock.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Polypipe Group has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue 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. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Polypipe Group's TSR for the last 5 years was 73%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's nice to see that Polypipe Group shareholders have received a total shareholder return of 9.6% over the last year. And that does include the dividend. However, that falls short of the 12% TSR per annum it has made for shareholders, each year, over five years. Keeping this in mind, a solid next step might be to take a look at Polypipe Group's dividend track record. This free interactive graph is a great place to start.
Of course Polypipe Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
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