These days it’s easy to simply buy an index fund, and your returns should (roughly) match the market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Pearl Global Industries Limited (NSE:PGIL) share price is up 31% in the last year, clearly besting the market return of around 4.3% (not including dividends). So that should have shareholders smiling. However, the stock hasn’t done so well in the longer term, with the stock only up 25% in three years.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.
During the last year Pearl Global Industries grew its earnings per share (EPS) by 165%. This EPS growth is significantly higher than the 31% increase in the share price. So it seems like the market has cooled on Pearl Global Industries, despite the growth. Interesting. This cautious sentiment is reflected in its (fairly low) P/E ratio of 6.24.
The graphic below depicts how EPS has changed over time.
Dive deeper into Pearl Global Industries’s key metrics by checking this interactive graph of Pearl Global Industries’s earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, Pearl Global Industries’s TSR for the last year was 34%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
We’re pleased to report that Pearl Global Industries shareholders have received a total shareholder return of 34% over one year. And that does include the dividend. That certainly beats the loss of about 2.4% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. Is Pearl Global Industries cheap compared to other companies? These 3 valuation measures might help you decide.
Of course Pearl Global Industries 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 IN exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.