Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. For example, the GPT Group (ASX:GPT) share price is down 34% in the last year. That contrasts poorly with the market decline of 2.6%. Longer term shareholders haven’t suffered as badly, since the stock is down a comparatively less painful 19% in three years. On the other hand the share price has bounced 6.0% over the last week. Less than a week ago GPT Group announced its financial results; you can catch up on the most recent data by reading our company report.
View our latest analysis for GPT Group
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
Unfortunately GPT Group reported an EPS drop of 99% for the last year. This fall in the EPS is significantly worse than the 34% the share price fall. It may have been that the weak EPS was not as bad as some had feared. With a P/E ratio of 948.13, it’s fair to say the market sees an EPS rebound on the cards.
The company’s earnings per share (over time) is 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. It might be well worthwhile taking a look at our free report on GPT Group’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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, GPT Group’s TSR for the last year was -31%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
We regret to report that GPT Group shareholders are down 31% for the year (even including dividends). Unfortunately, that’s worse than the broader market decline of 2.6%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there’s a good opportunity. Longer term investors wouldn’t be so upset, since they would have made 2.2%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We’ve spotted 4 warning signs for GPT Group you should be aware of, and 1 of them can’t be ignored.
GPT 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 AU exchanges.
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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. 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.
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