On average, over time, stock markets tend to rise higher. This makes investing attractive. But if you choose that path, you're going to buy some stocks that fall short of the market. Unfortunately for shareholders, while the PPL Corporation (NYSE:PPL) share price is up 11% in the last year, that falls short of the market return. In contrast, the longer term returns are negative, since the share price is 1.2% lower than it was three years ago.
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 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.
During the last year PPL grew its earnings per share (EPS) by 17%. This EPS growth is significantly higher than the 11% increase in the share price. So it seems like the market has cooled on PPL, despite the growth. Interesting.
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 PPL has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus 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. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, PPL's TSR for the last year was 17%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
PPL shareholders gained a total return of 17% during the year. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 6.3% over half a decade It is possible that returns will improve along with the business fundamentals. Keeping this in mind, a solid next step might be to take a look at PPL's dividend track record. This free interactive graph is a great place to start.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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