If You Had Bought Djerriwarrh Investments (ASX:DJW) Shares Five Years Ago You'd Have A Total Return Of Negative 4.2%

While not a mind-blowing move, it is good to see that the Djerriwarrh Investments Limited (ASX:DJW) share price has gained 26% in the last three months. But if you look at the last five years the returns have not been good. You would have done a lot better buying an index fund, since the stock has dropped 27% in that half decade.

View our latest analysis for Djerriwarrh Investments

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.

During the five years over which the share price declined, Djerriwarrh Investments' earnings per share (EPS) dropped by 7.3% each year. Notably, the share price has fallen at 6% per year, fairly close to the change in the EPS. This suggests that market participants have not changed their view of the company all that much. Rather, the share price change has reflected changes in earnings per share.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

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 Djerriwarrh Investments' 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. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Djerriwarrh Investments, it has a TSR of -4.2% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market gained around 5.2% in the last year, Djerriwarrh Investments shareholders lost 12% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 0.8% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for Djerriwarrh Investments (1 is potentially serious!) that you should be aware of before investing here.

Djerriwarrh Investments 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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